Gold seems vulnerable near two-week low as US-Iran standoff and inflation fears lift USD
- Gold retains its negative bias on Friday as rising US-Iran tensions continue to underpin the US Dollar.
- Inflation fears temper dovish Fed bets, further benefiting the buck and weighing on the commodity.
- The technical setup favors the XAU/USD bears and backs the case for a further depreciating move.
Gold (XAU/USD) remains depressed below the $4,700 mark during the Asian session on Friday, near a two-week trough set on the previous day, and seems poised to register weekly losses for the first time in the five weeks. The global risk sentiment remains fragile on the back of intensifying US-Iran tensions over the Strait of Hormuz and the lack of progress in peace talks. Moreover, reviving inflationary concerns temper dovish US Federal Reserve (Fed) expectations and underpin the US Dollar (USD), which, in turn, is seen weighing on the yellow metal.
Signs of friction between the US and Iran remain due to the American naval blockade of Iranian ports. In fact, Iran's Foreign Minister, Abbas Araghchi, called the blockade an act of war. Moreover, Iran’s chief negotiator, Mohammad Bagher Ghalibaf, said that a complete ceasefire only makes sense if it is not violated by the maritime blockade. Meanwhile, US President Donald Trump ordered the US Navy to shoot and kill any boat laying mines in the critical shipping channel. This dampens hopes for a durable de-escalation and continues to underpin the Greenback's global reserve currency status, exerting some pressure on Gold prices.
Meanwhile, continued disruptions to energy supplies through the strategic waterway remain supportive of elevated Crude Oil prices. This revives worries about a significant surge in global inflation and could prompt a more hawkish shift from major central banks, including the US Federal Reserve (Fed). The current market pricing indicates the possibility of only one 25-basis-point (bps) rate cut by the US central bank in 2026. The outlook acts as a tailwind for US Treasury bond yields and the USD. This turns out to be another factor that contributes to the offered tone surrounding the non-yielding Gold and backs the case for further losses.
Friday's US economic docket features the revised University of Michigan US Consumer Sentiment Index. The focus, however, remains glued to geopolitical developments, which might continue to infuse volatility across the global financial markets and produce some meaningful trading opportunities around the Gold. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for the XAU/USD pair remains to the downside. Hence, any attempted recovery might be seen as a selling opportunity and runs the risk of fizzling out rather quickly.
XAU/USD 4-hour chart
Gold seems vulnerable to extend the fall further below the ascending channel support
The commodity maintains a bearish near-term bias beneath the 200-period Exponential Moving Average (EMA) and is now looking to extend the slide below the rising channel floor at $4,680.47. The move away from the channel support hints at a loss of upside momentum.
Meanwhile, the Relative Strength Index (RSI) at 35.72 sits near oversold territory, and the Moving Average Convergence Divergence (MACD) remains negative with a sub-zero line reading around -4.92. This reinforces persistent downside pressure rather than an imminent reversal.
Hence, further weakness would leave XAU/USD vulnerable to exploratory downside. On the upside, immediate resistance emerges around the former channel bottom at $4,680.47, with a stronger cap at the 200-period EMA near $4,778.44, and the upper boundary of the ascending channel higher up at roughly $4,901.82. Only a recovery back above the said barriers would begin to alleviate the current bearish tone.
(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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