Gold slips despite escalating US-Iran conflict as Dollar strengthens
- Gold on the back foot, heads for weekly loss as US Dollar and Treasury yields rise.
- Rising Oil price fuels inflation fears, prompting markets to scale back Fed interest rate cut bets.
- XAU/USD slips below the 50- and 100-SMA on the 4-hour chart, signalling weakening momentum.
Gold (XAU/USD) edges lower on Friday, trimming earlier gains as a broadly stronger US Dollar (USD) and rising US Treasury yields continue to weigh on the non-yielding metal. At the time of writing, XAU/USD is trading around $5,089 after reaching a daily high near $5,143 during the Asian trading session.
Gold under pressure as markets scale back Fed rate cut bets amid rising Oil prices
The yellow metal remains on track for its first weekly loss in five weeks, even as the conflict between the United States (US) and Iran shows no signs of de-escalation, keeping geopolitical risks elevated.
The war has entered its seventh day, with the US-Israeli forces intensifying airstrikes on Tehran. At the same time, Iran continues to launch retaliatory missile and drone attacks against US military bases across the Gulf.
However, Gold has struggled to attract safe-haven flows as investors increasingly focus on the potential economic fallout, with rising Oil price fueling global inflation concerns. Qatar’s Energy Minister Saad al-Kaabi has warned that a halt in Gulf energy exports could push crude prices as high as $150 per barrel.
This has prompted traders to scale back expectations for Federal Reserve (Fed) interest rate cuts, lending support to the US Dollar and Treasury yields while increasing the opportunity cost of holding the non-yielding metal.
Markets are now pricing in roughly a 30% chance of a 25 bps rate cut in June, down from more than 40% a week ago, according to the CME FedWatch Tool. Meanwhile, Deutsche Bank noted that total easing priced in for 2026 has slipped to around 40 bps by December, the lowest level so far this year.
US jobs report in focus
Looking ahead, market attention shifts to the US Nonfarm Payrolls (NFP) report, due at 13:30 GMT. A stronger-than-expected reading could reinforce expectations that the Fed will keep interest rates higher for longer. Economists expect the US economy to add 59K jobs in February, after a surprise increase of 130K in January.
The US economic docket will also include the Retail Sales report and speeches from several Fed officials, which could provide further clues on the monetary policy outlook.
Technical analysis: XAU/USD drifts lower as bearish momentum builds
On the 4-hour chart, the near-term bias remains mildly bearish as the price slips below the 50-period Simple Moving Average (SMA) and marginally beneath the flatter 100-period SMA, suggesting fading upside momentum after sellers stepped in near the $5,400 area earlier this week.
The Relative Strength Index (RSI) has retreated toward the low-40s, aligning with corrective downside momentum rather than outright oversold conditions, and the rising Average Directional Index (ADX) near the high-20s suggests the current pullback is occurring within a developing trend environment rather than a static range.
On the upside, immediate resistance emerges near the 50-period SMA around $5,200, with a sustained break above this barrier needed to revive bullish momentum.
On the downside, the $5,000 psychological level serves as immediate support. A decisive break below this level could strengthen selling pressure, exposing the next downside targets near $4,850, followed by $4,650 and $4,400.
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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