Gold remains heavily offered, eyes YTD low amid hawkish central banks
- Gold prolongs its downtrend for the fourth day and drops back closer to the YTD low on Monday.
- Major central banks adopt a hawkish stance amid inflation concerns and weigh on the commodity.
- Rising geopolitical tensions support the safe-haven precious metal, though the upside seems limited.
Gold (XAU/USD) adds to its recent heavy losses registered over the past three weeks or so and attracts some follow-through selling for the fourth consecutive day on Monday. The commodity dives to its lowest level since early January during the Asian session, though it finds some support ahead of the $4,300 mark. Any meaningful recovery, however, seems elusive in the wake of hawkish stances from major central banks, which tend to undermine the non-yielding yellow metal.
The Bank of Japan (BoJ) maintained its bias toward monetary policy normalization and warned that surging Crude Oil prices driven by the Middle East conflict could exacerbate inflationary pressures. Adding to this, the Bank of England (BoE) signaled a hawkish shift and potential interest rate hikes as early as April due to inflation stemming from the Iran war. Furthermore, the European Central Bank's (ECB) hawkish messaging suggested that policymakers were prepared to act as soon as April 30 if price pressures intensify due to rising geopolitical tensions.
Meanwhile, the US Federal Reserve (Fed) raised the year-end inflation outlook (PCE), citing risks from higher energy prices due to the Iran war, and projected only one interest rate reduction this year, and one in 2027. This remains supportive of elevated US Treasury bond yields and continues to act as a tailwind for the US Dollar (USD), which turns out to be another factor exerting downward pressure on the Gold price. However, a further escalation of geopolitical tensions continues to benefit traditional safe-haven assets and help limit the downside for the precious metal.
In the latest developments, US President Donald Trump issued a 48-hour deadline for Iran to reopen the Strait of Hormuz and threatened to target Iran's energy infrastructure if the demand is not met. Iran responded by threatening to escalate strikes on energy infrastructure and target critical water desalination facilities across the Middle East, should Trump make good on a promise to “obliterate” the country’s power plants. This, in turn, holds back traders from placing aggressive bearish bets and assists the Gold price in defending the $4,300 round figure.
XAU/USD 4-hour chart
Gold bears might now await break below $4,300 before positioning for further weakness
From a technical perspective, the recent breakdown through the 200-period Exponential Moving Average (EMA) on the 4-hour chart and a subsequent fall below the $4,600 mark favor the XAU/USD bears. Moreover, the Moving Average Convergence Divergence (MACD) remains in negative territory with the line below its signal line and a still-deep histogram, which suggests persistent bearish momentum despite a slight contraction in downside pressure.
Adding to this, the Relative Strength Index (RSI) at 34 stays below the 50 midline after spending time in oversold territory, reinforcing that sellers retain control even as immediate downside acceleration eases. Meanwhile, immediate support sits at the daily low near $4,320-$4,319, and a clear drop beneath this area would open the way toward $4,250, extending the bearish sequence of lower lows.
On the upside, initial resistance emerges at the psychological $4,500 area, with stronger resistance aligning closer to $4,650, where recent consolidation unfolded below the 200-period average. A break above $4,650 would expose the $4,850 region as the next hurdle, where prior congestion developed before the latest leg lower. That said, rallies are exposed to renewed selling pressure as long as the Gold price trades beneath $4,650 and the 200-period EMA on the 4-hour chart.
(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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