Gold refreshes weekly top, eyes mid-$4,600 as USD weakens on US-Iran peace deal hopes
- Gold attracts buyers for the second straight day as US-Iran peace deal hopes undermine the USD.
- Easing inflation fears temper hawkish Fed bets and contribute to driving flows into the commodity.
- Traders now look forward to the US ADP report for some impetus ahead of the US NFP on Friday.
Gold (XAU/USD) gains some follow-through positive traction for the second straight day on Wednesday and recovers further from a more than one-month low, around the $4,500 mark, touched at the start of this week. The US Dollar (USD) weakens across the board amid the optimism over a potential US-Iran peace deal and supports the commodity. Moreover, retreating Crude Oil prices ease inflationary concerns and temper bets for a more hawkish US Federal Reserve (Fed), which is seen as another factor benefiting the non-yielding yellow metal.
US President Donald Trump said on Tuesday that “Project Freedom” – the US military’s operation to guide commercial ships out of the Strait of Hormuz – will be paused for a short period of time to see whether a deal with Iran can be finalized. Trump added in a post on Truth Social that great progress has been made toward a complete and final agreement with representatives of Iran. This follows earlier comments from Defense Secretary Pete Hegseth that the US was not seeking to re-escalate tensions with Iran, and that the US-Iran ceasefire holds for now. Furthermore, Secretary of State Marco Rubio announced that the US-led ‘Operation Epic Fury’ launched against Iran, jointly with Israel, on 28 February, is over.
This raised hopes for a peace deal, which would end the US-Israeli war in Iran and reopen the economically vital strait, boosting investors' confidence and undermining the USD's reserve currency status. Meanwhile, the latest developments dragged crude oil prices to a one-week low, easing fears of surging consumer inflation and paving the way for the US Fed to maintain a cautious stance. However, the CME Group's FedWatch Tool suggests that traders are now pricing in over a 35% probability that the US central bank will hike rates by the end of this year. This might hold back traders from placing aggressive bearish bets around the USD and keep a lid on any further near-term appreciation for the Gold price.
Hence, it will be prudent to wait for strong follow-through buying before confirming that the XAU/USD pair has bottomed out near the $4,500 mark and positioning for further gains. Traders now look to the US ADP report on private-sector employment, due later during the early North American session. Moreover, speeches from influential FOMC members and geopolitical developments will drive the USD demand. The focus, however, will remain glued to the closely-watched US Nonfarm Payrolls (NFP) report on Friday, which will play a key role in determining the near-term trajectory for the buck and the Gold price.
XAU/USD 4-hour chart
Gold approaches 200-SMA hurdle near $4,650 on H4 as bulls look to seize control
From a technical perspective, this week's goodish rebound from the $4,500 mark, or the vicinity of the 50% retracement level of the March-April rise, and a subsequent strength beyond the $4,600 round figure favor the XAU/USD bulls. The precious metal is edging closer to the 200-period Simple Moving Average (SMA) at $4,651.69, which now acts as the first hurdle barrier.
Meanwhile, momentum indicators support the topside stance. In fact, the Relative Strength Index (RSI) hovers near 59, indicating firm but not yet overbought conditions. Furthermore, the Moving Average Convergence Divergence (MACD) histogram stays positive and rising, hinting that bullish pressure is rebuilding as the XAU/USD pair challenges overhead supply.
On the downside, initial support is seen at the 38.2% Fibo. retracement at $4,588.83, with deeper pullbacks likely to find demand at the 50.0% retracement near $4,495.62 and then the 61.8% level around $4,402.41 if sellers gain traction. A convincing break below the latter will negate the constructive outlook and shift the near-term bias back in favor of the XAU/USD bears.
(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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