Gold has extended its downward spiral early Thursday, testing bids at the $4,400 threshold, while hitting two-month lows.
Gold remains vulnerable amid Mideast tensions
The ongoing Gold price downtrend is mainly fuelled by fading hopes of a US-Iran peace deal being reached anytime soon, especially after fresh attacks by the United States (US) on Iran.
On Monday, the US Central Command (CENTCOM) said it carried out new strikes on southern Iran, targeting missile sites and boats allegedly attempting to place naval mines.
In response, Iran’s Foreign Ministry said Iran “will not leave any act of mischief unanswered and will not hesitate in defending the country’s integrity” in a statement on Tuesday, accusing the US of violating the ceasefire.
Early Thursday, US CENTCOM confirmed that they carried out new strikes on Iran, targeting a military site in Bandar Abbas, a strategic port city.
US President Donald Trump said he won’t rush into a deal with Iran, while reiterating that the Strait of Hormuz will be “open to everybody” and that the US will “watch over it.”
On Wednesday, Trump said that the US is not easing sanctions on Iran and that the US would not unfreeze Iranian assets.
Additionally, the US Treasury Department said it has sanctioned the Persian Gulf Strait Authority, the body Iran has set up to manage the Strait of Hormuz.
The latest escalation by the US and Trump’s comments risk a major retaliation from Iran, which could unravel the fragile truce. Therefore, traders continue scouting for safety in the US Dollar (USD), weighing heavily on the USD-sensitive bullion.
Furthermore, the latest rebound in Oil, fuelled by the renewed US-Iran tensions, revives inflation concerns and justifies markets’ expectations of an interest rate hike by the US Federal Reserve (Fed) by the end of this year, adding to the Greenback’s uptick at the expense of Gold.
Against this backdrop, Gold remains vulnerable, eyeing further downside if the critical support on the daily chart is broken decisively amid a new wave of US-Iran geopolitical escalation.
Traders will also pay attention to the Fed’s preferred inflation measure, the core Personal Consumption Expenditures (PCE) Price Index, for fresh cues on the central bank’s path forward on interest rates.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,396.65, maintaining a bearish near-term bias as spot holds beneath a dense band of moving average resistance. Price sits just under the 200-day simple moving average (SMA) at $4,398.92, while the 21-day and 50-day SMAs at roughly $4,586 and $4,628, respectively, remain well above, reinforcing the broader downtrend that continues to track a descending resistance trend line. The Relative Strength Index (14) around 35 suggests weak momentum and lingering downside pressure, even as oversold conditions start to emerge.
On the topside, initial resistance is defined by the 200-day SMA clustered near $4,399, with the short-term 21-day SMA around $4,586 forming the next cap, followed by the 50-day SMA near $4,628. Further up, the 100-day SMA at about $4,801 and the overarching downward resistance trend line provide an additional supply zone that would likely limit any recovery attempts unless decisively reclaimed. With no clear nearby structural floors evident in the current dataset, the metal remains vulnerable to further slippage while it trades below this stacked moving-average ceiling.
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator
Core Personal Consumption Expenditures – Price Index (YoY)
The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures.” Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Leave a comment