Gold retakes $4,500 as Israel–Hezbollah ceasefire caps USD; not out of the woods yet
- Gold edges higher as a partial Israel-Hezbollah ceasefire keeps the USD bulls on the back foot.
- The uncertainty over US-Iran peace talks and Fed rate hike bets support the USD, capping the bullion.
- Traders look forward to this week’s release of the US NFP report for a fresh directional impetus.
Gold (XAU/USD) edges higher during the Asian session on Tuesday, though it lacks bullish conviction and currently trades just above the $4,500 psychological mark. A partial ceasefire between Hezbollah and Israel eases fears of a broader regional conflict, keeping a lid on further gains for the safe-haven US Dollar (USD) and offering support to the bullion. However, the uncertainty around US-Iran peace talks, along with inflation fears and prospects for interest rate hikes, continues to undermine demand for the yellow metal.
US President Donald Trump announced on social media on Monday that Israel has agreed to pull back any troops that were preparing to attack Beirut and its suburbs controlled by Hezbollah. Furthermore, Trump also communicated with Iran-aligned Lebanese militant group Hezbollah through intermediaries and secured a pledge that it would not attack Israel. A limited de-escalation of the conflict fails to assist the USD to build on the previous day's move up. However, mixed signals about US-Iran negotiations to end a three-month-old war act as a tailwind for the buck.
Iran warned that it would suspend negotiations with the US following fresh strikes and an Israeli military operation in Lebanon. However, Trump asserted that peace talks were ongoing with Iran, adding that he will have an agreement to extend the ceasefire and reopen the Strait of Hormuz over the next week. Nevertheless, investors remain on edge and opt to wait for further progress in US-Iran peace talks. In the meantime, expectations that elevated energy prices would prompt major central banks, including the US Fed, to stick to their hawkish outlook should cap the non-yielding Gold.
Market participants now look to the US economic docket – featuring the release of JOLTS Job Openings – for some impetus later during the North American session. The focus, however, will remain glued to the closely-watched US Nonfarm Payrolls (NFP) report on Friday and drive the USD demand. Apart from this, further developments surrounding the Middle East crisis should infuse volatility across the global financial markets and produce some meaningful trading opportunities around the Gold. The fundamental backdrop, meanwhile, seems tilted in favor of the XAU/USD bears.
XAU/USD 4-hour chart
Gold's bearish technical setup backs case for the emergence of fresh sellers at higher levels
From a technical perspective, the precious metal holds within a downward-sloping parallel channel and trades beneath the 200-period Simple Moving Average (SMA) on the 4-hour chart, retaining a bearish bias. The structure suggests sellers remain in control despite a modest stabilization in momentum indicators. In fact, the Relative Strength Index (RSI) hovers near a neutral 49. That said, the Moving Average Convergence Divergence (MACD) has slipped slightly into negative territory, hinting at waning bullish attempts.
Hence, any subsequent move up is more likely to confront initial resistance around at $4,615.35, followed closely by the 200-period SMA at $4,619.67, before the channel top near $4,655.17 comes into view. A sustained break above this cluster would be needed to ease the current downside pressure. On the downside, the main support is defined by the lower boundary of the descending channel at $4,320.15, where a decisive break would reinforce the broader bearish pattern and open the door to deeper losses.
(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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