Gold consolidates as investors weigh US tariffs, Iran talks and Fed outlook
- Gold consolidates on Wednesday after briefly reclaiming the $5,200 level.
- Investors are cautious ahead of US-Iran nuclear talks on Thursday.
- Technically, XAU/USD trades within a rising wedge on the 4-hour chart, with $5,250 acting as key resistance.
Gold (XAU/USD) struggles for direction on Wednesday, easing slightly after trimming part of the previous day’s losses. Although the downside appears limited, as fresh uncertainty over US trade policy and lingering geopolitical tensions in the Middle East continue to underpin safe-haven demand.
At the time of writing, XAU/USD trades near $5,171, after briefly climbing above the $5,200 level earlier in the European trading session. A broadly steady US Dollar (USD), alongwith a modest recovery in global equity markets, is limiting follow-through buying in Bullion.
Global trade jitters and US-Iran talks keep markets on edge
Global trade tensions resurfaced after US President Donald Trump announced a 10% tariff on imports from all countries, seeking to preserve tariff measures following the US Supreme Court’s ruling against the use of the International Emergency Economic Powers Act (IEEPA).
Market sentiment also remains cautious ahead of high-level US-Iran nuclear talks scheduled in Geneva on Thursday. Investors remain wary of a potential military escalation, given the significant presence of US armed forces in the region, if the talks fail to deliver a meaningful breakthrough.
Earlier in the day, US President Trump said during his State of the Union address that his preference is to resolve the Iran nuclear issue through diplomacy. Meanwhile, Iran’s Deputy Foreign Minister Abbas Araghchi said on Tuesday that Tehran is ready to take the necessary steps to reach an agreement with the US.
Traders reassess Fed easing path
Investors have scaled back expectations for near-term Federal Reserve (Fed) interest rate cuts as policymakers continue to flag concerns over persistent inflation pressure. Chicago Fed President Austan Goolsbee said on Tuesday that he is cautious about front-loading rate cuts without clear evidence that inflation is moving sustainably back toward the 2% target.
Boston Fed President Susan Collins said that interest rates were likely to stay unchanged “for some time” and that she was looking for more confidence that disinflation resumes.
This shift is likely supporting the US Dollar’s resilience, which in turn is acting as a headwind for the non-yielding metal, as Gold typically performs better in a lower interest rate environment.
Looking ahead, in the absence of major US data releases, traders will focus on Fed signals and geopolitical news for short-term direction in Gold.
Technical analysis: XAU/USD stalls below $5,250
The 4-hour chart shows XAU/USD forming a rising wedge pattern, typically seen as a bearish reversal structure. The near-term bias has turned mildly negative after sellers stepped in around the $5,250 area.
Momentum indicators suggest upside pressure is fading. The Relative Strength Index (14) has retreated from overbought readings above 70 toward the high-50s, signaling cooling upside pressure, while the Moving Average Convergence Divergence (MACD) (12, 26, 9) shows the line slipping below its signal with the histogram in negative territory, hinting at fading bullish momentum.
On the upside, a sustained break above the $5,250 level — the upper boundary of the wedge — would be needed to resume the broader uptrend, potentially opening the door toward the $5,500 region.
On the downside, a break below $5,100 would expose the 100-period SMA near $5,012, which aligns closely with the lower boundary of the wedge. A decisive move below this zone could trigger a deeper correction toward $4,850, with scope to extend toward $4,650 if selling pressure accelerates.
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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