Gold holds near two-week highs as US-Iran deal hopes weigh on US Dollar
- Gold holds near two-week highs as markets assess prospects for a possible US-Iran peace deal.
- Softer Oil prices and a weaker US Dollar support XAU/USD, while easing yields add to bullish momentum.
- XAU/USD keeps a mildly bullish tone above the $4,500 support zone, though upside remains capped below key daily moving averages.
Gold (XAU/USD) holds firm on Thursday, hovering near two-week highs as price action remains driven by geopolitical headlines, with traders awaiting further clarity around a possible peace deal between the United States (US) and Iran. XAU/USD is trading around $4,735 at the time of writing after rallying nearly 3% on Wednesday.
Markets remain cautiously optimistic that a deal to end the war in the Middle East could eventually be reached, with Tehran reviewing the latest US-backed proposal. Iran is expected to deliver its response to Pakistan on Thursday, according to a regional source cited by CNN.
Speaking to reporters at the White House on Wednesday, US President Donald Trump said, “We’ve had very good talks over the last 24 hours, and it’s very possible that we’ll make a deal.”
Global markets reacted positively to the latest developments, while Oil prices extended their pullback from recent highs and the US Dollar (USD) slid back toward pre-war levels.
The precious metal is benefiting from a combination of a weaker USD and easing Treasury yields, as the decline in Oil prices helps reduce inflation fears. This has prompted traders to shift back toward pricing in the possibility of Federal Reserve (Fed) interest rate cuts by year-end, reversing earlier expectations that the central bank may need to keep rates higher for longer.
Fed officials remain in no rush to resume monetary policy easing. Boston Fed President Susan Collins said on Thursday that interest rates may need to remain on hold “for a longer period” while warning that “the odds of a worse inflation scenario have increased.” Collins added that an alternative scenario could make the Fed consider “a rate hike,” though she still expects interest rate cuts “down the road.”
However, the upside in Gold appears limited as uncertainty surrounding the negotiations persists. Previous peace talks and proposals between Washington and Tehran have failed to produce a breakthrough amid differences over Iran’s nuclear program. Trump has threatened to resume bombardment if the talks collapse.
Beyond geopolitical developments, investor attention is also turning toward upcoming US labor market data. The US ADP Employment Change report released on Wednesday showed private sector payrolls increased by 109K in April, up from 61K in March and above market expectations of 99K.
Traders now await the weekly Initial Jobless Claims data due later in the American session, followed by the Nonfarm Payrolls (NFP) report on Friday, for fresh clues on the Fed’s monetary policy path.
Technical Analysis: XAU/USD rebounds, but key moving averages limit upside
On the daily chart, XAU/USD sits in a neutral, range-bound stance, holding above the 200-day Simple Moving Average (SMA) near $4,307 but capped beneath the 100-day SMA at about $4,774 and the 50-day SMA close to $4,790, which together form a dense supply zone overhead. The Relative Strength Index (RSI) around 53 hints at mildly positive but non-impulsive momentum, while the subdued Average Directional Index (ADX) near 22 suggests the prevailing consolidation lacks a strong directional trend.
On the topside, initial resistance is located at the 100-day SMA near $4,774, followed by the 50-day SMA around $4,790, ahead of a more prominent horizontal barrier at $4,850. On the downside, the first notable support emerges near the horizontal floor at $4,500, with the 200-day SMA around $4,307 providing a deeper structural backing in the event of a broader pullback.
(The technical analysis of this story was written with the help of an AI tool.)
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.
Recommended Articles
