Gold eases from three-week top, holds near $4,800 as US-Iran ceasefire pressures USD
- Gold gains strong traction for the second straight day amid a combination of supporting factors.
- The US-Iran ceasefire dents the USD’s reserve currency status and benefits the precious metal.
- Easing inflation concerns temper Fed rate hike bets and lend additional support to the XAU/USD pair.
Gold (XAU/USD) builds on the previous day's bounce from the $4,600 neighborhood and scales higher for the second straight day, hitting a nearly three-week peak during the Asian session on Wednesday. The precious metal, however, trims a part of its strong intraday gains and currently trades around the $4,800 round figure, still up 2.0% for the day amid a bearish US Dollar (USD).
The USD Index (DXY), which tracks the Greenback against a basket of currencies, tumbles to a nearly one-month low in reaction to the US-Iran ceasefire news. US President Donald Trump announced in a post on Truth Social that he will suspend planned military strikes against Iran for two weeks, provided Tehran agrees to a complete, immediate, and safe opening of the Strait of Hormuz. Iran stated that it has accepted a two-week ceasefire, with negotiations to begin on Friday in Islamabad, Pakistan. This, in turn, boosts investors' confidence and undermines the USD's global reserve currency status, benefiting the Gold price.
Meanwhile, Iran’s Foreign Minister, Seyed Abbas Araghchi, said in a statement that safe passage through the key waterway will be possible for a period of two weeks, triggering a steep decline in Crude Oil prices. This helps ease inflationary concerns and tempers bets for a rate hike by the US Federal Reserve (Fed). The outlook drags US Treasury bond yields lower and turns out to be another factor weighing on the Greenback, offering additional support to the non-yielding Gold. The lack of follow-through buying, however, warrants some caution for the XAU/USD bulls before positioning for a further appreciating move.
XAU/USD 4-hour chart
Gold needs to surpass the $4,920 confluence hurdle to negate any near-term negative bias
From a technical perspective, the near-term bias is mildly bullish as the Gold price recovers above the mid-range of the recent consolidation. The XAU/USD pair, however, still holds below the descending 200-period Simple Moving Average (SMA) on the 4-hour chart, which coincides with the 61.8% Fibonacci retracement level of the March downfall and keeps the broader trend under pressure.
Meanwhile, the Moving Average Convergence Divergence (MACD) line has turned higher into positive territory with the histogram expanding, suggesting strengthening upside momentum after the earlier corrective phase. The Relative Strength Index (RSI) hovers in the mid-60s, reinforcing a positive tone without yet signaling extreme overbought conditions.
Nevertheless, it will still be prudent to wait for a sustained strength above the $4,920 confluence hurdle before positioning for gains to the $5,000 psychological mark and then the $5,141 level at the 78.6% retracement from the next upside objectives.
On the downside, immediate support is seen at the 50% retracement level, around the $4750 area, below which the Gold price could drop to the 38.20% Fibo. retracement at $4,605. This is followed by a deeper cushion near $4,411 at the 23.60% level, where a break would weaken the current bullish bias and expose the lower part of the broader Fibonacci range.
(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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