Gold weakens as stalled US‑Iran talks and Fed hike bets bolster US Dollar
- Gold struggles to capitalize on the previous day’s bounce from the lowest level since late March.
- The lack of progress in US-Iran peace talks underpins the USD, exerting pressure on the bullion.
- Fed rate hike bets further lend support to the USD and weigh on the non-yielding commodity.
Gold (XAU/USD) attracts fresh sellers following an Asian session move up to the $4,590 region, stalling the previous day's modest recovery from the lowest level since March 30. Despite renewed hopes for a potential US-Iran peace deal, investors remain skeptical amid major disagreements over Tehran's nuclear program and the Strait of Hormuz. Furthermore, hawkish US Federal Reserve (Fed) expectations assist the US Dollar (USD) to regain positive traction and act as a headwind for the non-yielding bullion.
US President Donald Trump said on Monday that he is holding off a planned attack on Iran at the request of Qatar, Saudi Arabia, and the United Arab Emirates. Trump further added that negotiations are not taking place, fueling optimism over a long-elusive diplomatic agreement to end the Iran conflict. The market reaction so far has been muted amid mixed signals. In fact, Iranian President Masoud Pezeshkian responded to Trump’s “clock is ticking” warning and vowed not to bow before any power, and added that Tehran had entered the dialogue with dignity, authority, and the preservation of the nation’s rights. Trump, on the other hand, said that he has instructed the US military to remain prepared for a full-scale attack on Iran if a deal is not reached. This keeps geopolitical risks in play and underpins the USD's reserve currency status.
Meanwhile, markets have completely priced out any possibility of Fed rate cuts for the remainder of 2026. Instead, they are now betting on at least one interest rate hike before year-end amid rising energy and consumer inflation fears. The CME Group's FedWatch Tool indicates a nearly 40% chance that the US central bank will raise borrowing costs by 25 basis points (bps) at the December policy meeting. Adding to this, inflation and fiscal concerns keep the yield on the long-term 30-year US government bond near its highest level since 2023, which turns out to be another factor offering support to the Greenback and undermining demand for the Gold price. Traders, however, seem hesitant and look to the release of FOMC Minutes on Wednesday for more cues about the Fed's interest rate path before placing directional bets on the XAU/USD pair.
In the meantime, the market focus will remain on further developments surrounding the Middle East crisis, which could inject volatility across the global financial markets and provide some impetus to the precious metal. Nevertheless, the aforementioned fundamental backdrop seems tilted in favor of bearish traders, suggesting that the path of least resistance for the Gold price is to the downside.
XAU/USD 1-hour chart
Gold needs to find acceptance below $4,500 to back the case for deeper losses
From a technical perspective, the precious metal holds below the 100-hour Simple Moving Average (SMA), keeping the near-term bias bearish despite the recent rebound from lower levels. Adding to this, the Moving Average Convergence Divergence (MACD) remains in positive territory, but its latest reading at 3.32 hints at waning upside momentum. Meanwhile, the Relative Strength Index (RSI) around 51.7 suggests only modest bullish pressure rather than a decisive trend.
This, in turn, makes it prudent to wait for acceptance below the $4,500 psychological mark and some follow-through selling below the overnight swing low, around the $4,480 region, before positioning for deeper losses. On the topside, initial resistance is defined by the 100-hour SMA at $4,625.58, and a sustained break above this barrier would be needed to ease the current downside bias and open the way for a more constructive recovery.
(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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