Gold weakens back below $4,150 amid Iran uncertainty, Fed hike bets, bullish USD
- Gold comes under renewed selling pressure amid the underlying USD bullish sentiment.
- The USD stands tall near a one-year high amid the Iran uncertainty and the hawkish Fed.
- Traders look to the flash US PMIs for some impetus ahead of the US PCE on Thursday.
Gold (XAU/USD) meets with a fresh supply during the Asian session on Tuesday and slides back below the $4,150 level, reversing a major part of the previous day's move higher amid a bullish US Dollar (USD). Despite positive signals from US-Iran peace talks, widespread skepticism remains toward a final deal. This, along with the US Federal Reserve's (Fed) hawkish tilt, assists the USD in preserving its recent strong gains to the highest level since May 2025, which continues to undermine the precious metal.
Mediators Qatar and Pakistan said on Monday that the first round of negotiations between the US and Iran – aimed at securing a comprehensive agreement to end the ongoing conflict – concluded with encouraging progress. The two mediating countries said in a joint statement following talks in Switzerland that both sides have agreed on a roadmap towards reaching a final deal within 60 days. The US followed through on a key commitment and temporarily lifted sanctions on Iranian oil exports.
Adding to this, the US will mediate another round of talks to end clashes in Lebanon between Iran-backed Hezbollah and Israel. The market optimism, however, remains capped amid conflicting US-Iran messages. US Vice President JD Vance said that Iran agreed to admit nuclear monitors and is prepared to accept extensive weapons inspections as part of ongoing diplomatic efforts. However, Iran's foreign ministry told state media that Tehran had made no new commitments on nuclear inspections.
Meanwhile, US President Donald Trump said preventing Iran from obtaining a nuclear weapon outweighs the potential economic consequences of prolonged military action. Moreover, Iran's chief negotiator and parliamentary speaker, Mohammad Bagher Ghalibaf, told state media on Tuesday that the Strait of Hormuz will remain under Tehran's administration and would not return to the pre-war status. This keeps geopolitical risk premium in play and underpins the safe-haven buck.
On the monetary policy front, the Fed signaled last week that it will need to raise policy rates this year if inflation remains sticky. Furthermore, Chicago Fed President Austan Goolsbee acknowledged that inflation is heading in the wrong direction and running well above the central bank's 2% target. This reaffirms bets that the Fed will raise borrowing costs at least once, either in September or in December, which lends additional support to the buck and weighs on the non-yielding Gold.
Traders now look forward to the release of the flash US PMIs, due later during the North American session. This, along with speeches from influential FOMC members, will drive the USD and provide some impetus to the Gold. The focus, however, remains on the US Personal Consumption Expenditures (PCE) Price Index and the final Q1 GDP print on Thursday. Apart from this, the US-Iran headlines might continue to infuse volatility in the financial markets and produce meaningful trading opportunities.
XAU/USD 4-hour chart
Gold remains vulnerable while below 100-SMA on H4
From a technical perspective, the XAU/USD pair keeps a bearish near-term tone, beneath the 100-period Simple Moving Average (SMA) on the 4-hour chart. However, the Moving Average Convergence Divergence (MACD) indicator (12, 26, 9) has turned marginally positive with the signal line just above zero, hinting at tentative relief. That said, the Relative Strength Index (RSI) at 37.17 remains in weak territory and suggesting that any bounce would still unfold within a corrective context.
On the topside, the 100-period SMA at $4,311.19 is the first meaningful resistance and needs to be reclaimed on a sustained basis to ease immediate downside pressure and open the way for a more constructive recovery phase. Moreover, traders may continue to treat the current zone as a vulnerable consolidation area, with failure to challenge $4,311.19 likely to keep Gold exposed to further pullbacks on the four-hour horizon.
(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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