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Gold prices (XAU/USD) experienced a slight recovery from earlier losses on Thursday, yet the upward momentum remains fragile due to a stronger US Dollar (USD) and high oil prices, alongside uncertainties stemming from stalled US-Iran relations.
As of the latest updates, XAU/USD is trading at approximately $4,740, rebounding slightly from an intraday low of $4,684.
Shipping Disruptions in Hormuz Fuel Inflation Anxiety
Tensions in the Strait of Hormuz are escalating, attributed to a blockade implemented by the US Navy and Iranian forces. The Islamic Revolutionary Guards Corps reportedly seized two vessels in the area, as confirmed by shipping companies and the semi-official Tasnim news agency.
Moreover, a Pentagon analysis cited by The Washington Post suggests it could take as long as six months to clear mines from the waterway, posing a significant risk of ongoing global oil supply disruptions.
The surge in crude oil prices, exacerbated by these tensions, has intensified global inflation apprehensions, increasing the chances of sustained elevated interest rates from major central banks. Generally, gold is seen as a hedge against inflation; however, increasing borrowing costs tend to depress demand for non-yielding assets like gold, as investors pivot towards interest-bearing alternatives like bonds.
Inflationary Pressures Bolster US Dollar
Market participants remain doubtful regarding the resumption of negotiations between the US and Iran, despite a ceasefire extension announced by US President Donald Trump, which has not been formally acknowledged by Tehran. The Iranian government has voiced criticism against the ongoing naval blockade by the US, citing it as a primary impediment to diplomatic dialogues.
This uncertain backdrop has lent support to the US Dollar, which had recently corrected downwards on optimism for a de-escalation following the announcement of the ceasefire. The US Dollar Index (DXY) is currently around 98.78, marking its third consecutive day of gains.
Simultaneously, waning expectations regarding interest rate cuts from the Federal Reserve have bolstered US Treasury yields, further enhancing the appeal of the US Dollar and pressuring gold prices.
Looking forward, traders are anticipated to monitor the US-Iran situation closely, while initial jobless claims in the US have risen to 214K, exceeding forecasts of 212K and up from the previous figure of 208K.
Additionally, attention is directed towards the upcoming S&P Global PMI data, which may offer fresh insights into business activity and influence the near-term trajectories of both the US Dollar and gold prices.
Technical Analysis: Gold Faces Downside Risks
From a technical standpoint, XAU/USD currently trades below the Bollinger midline, indicating persistent downside risks. The metal is positioned under the 20-period Simple Moving Average (SMA)—the midline of the Bollinger Bands—approximately at $4,756, reflecting a bearish sentiment while still remaining above the lower support level near $4,677.
The Relative Strength Index (RSI) reading of around 41 supports a bearish outlook, suggesting that sellers maintain control. The Average True Range (ATR) figure near 38 indicates ongoing but subdued volatility.
On the upside, immediate resistance is positioned at the 20-period SMA/Bollinger midline around $4,756, with another critical resistance point at the upper Bollinger band near $4,834. A failure to breach these levels could sustain the broader corrective trend. Conversely, immediate support rests at the lower Bollinger band around $4,677; a decisive breakdown below this level might signal a deeper pullback, while holding above it could encourage a consolidation phase.
Note: The technical analysis presented has been supplemented by an AI tool.
Conclusion
Current trends in gold prices are influenced by geopolitical tensions, particularly in the Strait of Hormuz, and the dynamics of US-Iran negotiations. The interplay between rising oil prices, inflationary pressures, and the strength of the US Dollar presents a complex environment for gold investors. As market conditions evolve, particularly concerning economic indicators and geopolitical developments, traders will remain vigilant for indicators that may shift market sentiment.
