Gold struggles to extend recovery beyond 100-hour SMA as rising US bond yields cap gains
- Gold attracts some dip-buyers following a bearish gap opening, though it lacks follow-through.
- Renewed US-Iran tensions provided a modest lift to the USD and weighed on the precious metal.
- Fading Fed rate hike bets keep a lid on any further USD appreciation and support the bullion.
Gold (XAU/USD) rebounds from a one-week trough, around the $4,737-$4,738 area touched during the Asian session, and fills a part of the weekly bearish gap opening on Monday. The US Dollar (USD) retreats from a one-week high and, for now, seems to have stalled its recovery move from a nearly two-month low set on Friday. This turns out to be a key factor lending some support to the commodity. However, a sharp intraday rally in Crude Oil prices revived inflationary concerns and pushed US Treasury bond yields higher, capping the non-yielding yellow metal's intraday move up to the $4,815 region.
The US-Iran standoff over the Strait of Hormuz tempers hopes for more peace talks before the current ceasefire ends on April 22. The US Navy intercepted and seized an Iranian-flagged cargo ship in the Gulf of Oman as part of its blockade. Iran viewed this as a breach of the ceasefire agreement and once again closed the strategic waterway after briefly opening it following a 10-day truce between Israel and the Lebanese group Hezbollah on Friday. Meanwhile, US President Donald Trump said that the naval blockade of Iranian ports would continue until a peace deal was agreed between the two countries.
The White House confirmed that US Vice President JD Vance would lead another delegation for a second round of talks on ending the war with Iran. Iranian state media has reported that officials will not participate while the US blockade remains in place. This dampens hopes for a peace agreement before the current ceasefire ends on April 22, which, in turn, triggers a fresh wave of the global risk-aversion trade and benefits the Greenback reserve currency status. The USD bulls, however, refrain from placing aggressive bets amid diminishing odds for an interest rate hike by the US Federal Reserve (Fed).
Instead, the CME Group's FedWatch Tool indicates that there is a roughly 40% chance of a Fed rate cut by the year-end, which keeps a lid on any meaningful USD appreciation and acts as a tailwind for the non-yielding Gold. The lack of follow-through buying, however, warrants some caution before positioning for the resumption of the precious metal's recent move up from the March swing low, around the $4,100 mark. There isn't any relevant market-moving economic data due for release from the US, leaving the USD and the commodity at the mercy of fresh developments surrounding the US-Iran saga.
XAU/USD 1-hour chart
Gold needs to find acceptance above 100-hour SMA to back the case for additional gains
The XAU/USD pair struggles to capitalize on the intraday recovery beyond the 100-hour Simple Moving Average (SMA) or find acceptance above the $4,800 mark. Moreover, the Relative Strength Index (RSI) around 44 hints at fading upside momentum, while the Moving Average Convergence Divergence (MACD) indicator stays in negative territory with the line below its signal and a negative histogram. This reinforces the idea that sellers retain control unless the Gold can push decisively back over the nearby average.
The said SMA at $4,805.60 is the first and only clear resistance, and a sustained break above this barrier would be needed to ease the current downside bias and open the door for a stronger recovery. As long as the XAU/USD pair trades under the said barrier, rallies are likely to face selling interest rather than signal a durable bullish reversal.
(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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