Gold holds gains as US-Iran deal reduces Fed hike expectations
- Gold price posts modest gains in Tuesday’s early Asian session.
- A memorandum of understanding to end the war has been signed by Trump, JD Vance, and the speaker of Iran's parliament.
- Swap traders priced in lower chances of a rate hike by December.
Gold price (XAU/USD) trades with mild gains during the early Asian session on Tuesday. The precious metal extends the rally after the United States (US) and Iran reached a comprehensive framework deal to end hostilities, easing inflation concerns.
Bloomberg reported on Monday that US President Donald Trump and Vice President JD Vance signed an electronic copy of a memorandum of understanding with Iran. Trump noted that the Strait of Hormuz “is already partially opened,” and “it’ll be completely opened” on Friday.
"The gold market is moving past the conflict and pricing it out. The peace deal news took down Treasury yields, the dollar, and oil, and those were the biggest inflation and cross asset risks," said Phillip Streible, chief market strategist at Blue Line Futures.
Bets on Federal Reserve (Fed) rate hikes receded after the framework deal, supporting the yellow metal, a non-yielding asset. Traders cut the chance of a US rate hike in December to 58% from nearly 70% last week, according to the CME FedWatch tool.
The Fed is due to announce its next policy decision on Wednesday. Economists expect the US central bank to keep its benchmark rate in a range of 3.50% to 3.75% as it waits to see how the war’s energy-price shock ripples through the economy.
XAU/USD daily chart
Gold keeps the bearish vibe in near term below the key 100-day SMA
In the daily chart, the near-term tone of XAU/USD stays bearish as price holds beneath the Bollinger middle band and well below the 100-day simple moving average (SMA), keeping the broader recovery structure capped. The Relative Strength Index (RSI) at about 43 sits below the midline, hinting at lingering downside pressure despite the recent attempt to stabilize.
On the topside, initial resistance emerges at the June 9 high of $4,363. The next hurdle to watch is the Bollinger SMA midline near $4,415, with the upper Bollinger band around $4,685 and the 100-day SMA at roughly $4,762 forming a broader supply zone if a rebound extends. On the downside, the lower Bollinger band at about $4,145 marks the next notable support, and a decisive break beneath this area would expose further weakness toward prior swing lows.
(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.
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