Gold (XAU/USD) gains some positive traction during the Asian session on Friday and reverses a part of the previous day’s fall to the $4,350 area. The US Dollar (USD) edges lower after US President Donald Trump announced that he will delay strikes on Iran’s energy infrastructure and extended the deadline to reopen the Strait of Hormuz until April 6. This turns out to be a key factor offering some support to the commodity. Any meaningful appreciation, however, seems elusive amid expectations of higher interest rates globally, which tends to undermine demand for the non-yielding yellow metal.
Investors now seem convinced that major central banks, including the US Federal Reserve (Fed), will adopt a hawkish stance as escalating geopolitical risks remain supportive of higher energy prices and continue to fuel inflation concerns. In fact, traders now seem to have fully priced out the possibility of any further rate cuts by the US central bank and rapidly increasing bets for a hike by the end of this year. The outlook acts as a tailwind for US Treasury bond yields and favors the USD bulls, which, in turn, should keep a lid on the Gold price and warrants some caution before positioning for further gains.
Meanwhile, contrasting news surrounding the US-Iran conflict has been weighing on investors’ sentiment. Speaking at a Cabinet meeting, Trump said that Iran was “begging” to make a deal. Iranian officials, however, have denied holding talks with the US and said that there is no chance of a deal between the two adversaries. Adding to this, the deployment of additional US troops has been fueling speculation of a potential ground operation. This keeps geopolitical risks in play, which could further underpin the Greenback’s global reserve currency status and should cap the upside for the Gold price.
The fundamental backdrop, along with the bearish technical setup, makes it prudent to wait for strong follow-through buying before positioning for an extension of the XAU/USD pair’s goodish recovery from a four-month low, touched on Monday.
XAU/USD daily chart
Gold is likely to attract fresh sellers at higher levels amid a bearish technical setup
The recent breakdown below the rising 100-day Simple Moving Average (SMA) and this week’s failure near the said area validate the near-term negative outlook for the precious metal. Momentum remains under pressure, with the Moving Average Convergence Divergence (MACD) indicator holding in negative territory and its line below the signal line, suggesting persistent downside forces despite earlier attempts to stabilize.
Meanwhile, the Relative Strength Index (RSI) recovers from oversold conditions but holds in the low-30s, indicating weak demand and room for sellers to remain in control while rebounds stay capped below the mentioned averages. Hence, the 100-day SMA, around $4,630, might continue to act as an immediate strong barrier, where any recovery would first confront trend-context supply, followed by stronger resistance at the recent congestion area near $4,820. A daily close above that band would be needed to ease the bearish tone and expose the $5,000 region.
On the downside, immediate support aligns with the recent low around $4,380, with a break lower opening the way toward the rising 200-day SMA near $4,120 as the next key support zone. A sustained hold above $4,380 would keep the decline in a corrective mode, but failure there would reinforce the current bearish bias for XAU/USD.
(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.
