Gold weakens as Iran deal uncertainty and hawkish Fed stance support USD
- Gold meets with a fresh supply on Friday as the Iran peace deal uncertainty lifts the USD.
- Hawkish Fed expectations further support the USD and weigh on the non-yielding bullion.
- The XAU/USD pair remains on track to register heavy losses for the second straight week.
Gold (XAU/USD) attracts some sellers following a modest Asian session uptick to the $4,246-$4,247 region on Thursday, stalling the previous day's solid recovery move from its lowest level since November 2025. The US and Iran continue to send mixed and contradictory signals regarding a potential peace deal. This helps revive demand for the safe-haven US Dollar (USD), which, along with hawkish US Federal Reserve (Fed) expectations, exerts some downward pressure on the non-yielding yellow metal.
US President Donald Trump said on Thursday that a deal had been reached with Iran and the final document could be signed soon, perhaps even over the weekend. The optimism, however, fades rather quickly as Iran countered that it had not reached a final decision on an agreement. Furthermore, reports suggest that Iran's new Supreme Leader, Mojtaba Khamenei, has not agreed to the proposed US peace deal. Adding to this, Iran's Foreign Ministry reportedly said that key issues, including Hormuz access and frozen funds, remain unresolved, per Fars.
Meanwhile, Iranian forces blocked a tanker from transiting through the strategic waterway without coordination, underscoring uncertainty over Iran's position. Adding to this, Fox News reported that US forces intercepted and shot down two Iranian one-way attack drones near the Strait of Hormuz. The latest developments keep geopolitical risk premiums in play and trigger a modest recovery in Crude Oil prices, fueling inflationary concerns. This comes amid signs of re-accelerating inflation in the US, backing the case for higher-for-longer interest rates.
The US Consumer Price Index (CPI) and Producer Price Index (PPI) released this week pointed to re-accelerating inflation, reaffirming bets that the US central bank will raise borrowing costs by the year-end. This further acts as a tailwind for the Greenback and weighs on the Gold. Traders, however, might refrain from placing aggressive bearish bets around the XAU/USD pair and opt to wait for further developments surrounding the Middle East crisis. Nevertheless, the commodity remains on track to register heavy losses for the second consecutive week.
XAU/USD daily chart
Gold’s technical setup favors bearish traders and backs the case for deeper losses
From a technical perspective, the precious metal retains a bearish near-term bias beneath the 200-day Simple Moving Average (SMA). Moreover, Friday's failure near the 23.6% Fibonacci retracement level of downfall from the April monthly swing high suggests that the overnight recovery might still be categorized as a short-covering move.
Meanwhile, the Moving Average Convergence Divergence (MACD) remains in negative territory with the line below its signal and a still-negative histogram. Adding to this, the Relative Strength Index (RSI) hovers in the mid-30s, both of which hint that downside pressure persists despite a modest rebound from recent lows.
On the topside, initial resistance emerges at the 23.6% Fibo. around $4,229, followed by the 38.2% level near $4,355. Higher up, the 200-day SMA at about $4,450 and the adjacent 50% retracement at roughly $4,456 form a stronger cap, before the 61.8% level at $4,558 and the 78.6% retracement at $4,703 open the way toward the $4,887 cycle high. On the downside, the key support to watch is the recent swing low around $4,026, where a break would signal scope for a deeper corrective leg.
(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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