Gold remains close to four-week top amid Iran diplomacy hopes, reviving Fed rate cut bets
- Gold regains some positive traction following the previous day’s pullback from a four-week top.
- Iran diplomacy hopes and fading Fed rate hike bets undermine the USD, supporting the bullion.
- Hormuz risks could limit deeper losses for the safe-haven USD and keep a lid on the commodity.
Gold (XAU/USD) attracts some dip-buyers during the Asian session on Thursday and reverses a major part of the previous day's retracement slide from a nearly four-week high. Investors continue to move toward riskier assets amid hopes that the door for Iran diplomacy remains open, which is seen as undermining the US Dollar's (USD) reserve currency status and benefiting the commodity.
In fact, US President Donald Trump said that he believes the war with Iran may be coming to a conclusion soon, while the White House expressed optimism about reaching a deal to end the conflict. Moreover, reports suggest that there are growing prospects for a second round of peace talks between the US and Iran that could take place in a matter of days. The optimism, in turn, remains supportive of the upbeat market mood and dents the safe-haven premium. Adding to this, diminishing odds for a rate hike by the US Federal Reserve (Fed) contribute to the bearish sentiment surrounding the USD and further lend support to the non-yielding Gold.
Expectations for diplomatic efforts to end the conflict keep Crude Oil prices well within striking distance of a three-week low set on Tuesday. Moreover, the US Producer Price Index (PPI) released earlier this week eased concerns about the inflationary impact of the war-driven surge in energy prices and tempered hawkish Fed expectations. According to the CME Group's FedWatch Tool, late 2026 remains the primary window for potential easing by the US central bank. This, in turn, drags the USD Index (DXY), which tracks the Greenback against a basket of currencies, to its lowest level since late February and backs the case for additional gains for the Gold.
Meanwhile, the US naval blockade of Iranian ports, imposed after the end of the Islamabad talks last Saturday, has been fully implemented. Moreover, the leader of Iran’s joint military command said that its military could halt trade in the Gulf region if the US does not lift its blockade. Iran has also demanded an end to Israeli attacks on Lebanon as a precondition for further talks with the US. However, the Israeli Prime Minister, Benjamin Netanyahu, indicated that he had not committed to a ceasefire and said that he instructed the IDF to continue thickening the security zone. This keeps geopolitical risks in play, which should limit USD losses and cap gains for the Gold.
XAU/USD 4-hour chart
Gold needs to clear 200-SMA pivotal resistance on H4 to back the case for further upside
The XAU/USD pair remains just under the 200-period Simple Moving Average (SMA) at $4,831.22, which acts as immediate overhead resistance and keeps the rebound in check. Meanwhile, the Moving Average Convergence Divergence (MACD) has turned positive, and the Relative Strength Index (RSI) hovers near 60. This hints at firm but not overheated bullish momentum that has yet to overpower the prevailing structural cap.
Hence, it will be prudent to wait for sustained strength and acceptance above the 200-SMA barrier before positioning for further gains to $4,916.20, or the 61.8% Fibonacci retracement level of the March downfall. A sustained break above the latter would be needed to ease the current ceiling and open the way toward $5,136.01 and then the cycle high area around $5,416.01.
On the downside, first support is aligned with the 50% retracement at $4,761.81, with additional layers of demand at the 38.2% Fibo. level near $4,607.41 and the 23.6% Fibo. around $4,416.39. The said support level would come into play if sellers regain control beneath the current consolidation.
(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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