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Gold Trading Notches Choppy Movements Amid US-Iran Tensions
On Tuesday, Gold (XAU/USD) was caught in a volatile trading range, currently hovering around $4,657. The market atmosphere is restless as the deadline set by US President Donald Trump for a deal with Iran approaches. Traders are watching closely for any updates regarding a potential truce.
Market Vigilance as Deadline Approaches
Caution prevails among traders ahead of Trump’s ultimatum for Iran, demanding a deal or risk opening the Strait of Hormuz by 8:00 p.m. Eastern Time. Trump has threatened to target Iranian energy and civilian infrastructure if an agreement isn’t reached.
Initial hopes for a ceasefire appear to be dwindling. Iran’s Islamic Republic News Agency reported Tehran’s rejection of a ceasefire proposal relayed through Pakistan, instead offering a ten-point plan for a permanent war cessation, sanctions relief, and safe passage through the Strait. Although Trump acknowledged Iran’s proposals as a significant step, he deemed them "not good enough."
Despite the escalating geopolitical risks, Gold has yet to draw substantial safe-haven investment primarily due to the robust US Dollar (USD), with global liquidity demands overshadowing traditional buying patterns for gold.
Rising Oil Prices Impact Market Sentiment
Another hindrance for Gold prices stems from escalating oil prices, which are fuelling inflation concerns and posing risks to economic growth. This situation has led investors to adjust their expectations regarding future Federal Reserve interest rate cuts.
US inflation data for March, anticipated later this week, is likely to reflect this trend, with forecasts suggesting a rise of 0.9% MoM in the Consumer Price Index (CPI) compared to 0.3% in February. Annual inflation is also predicted to rise to 3.3% from 2.4%. Consequently, the market has largely eliminated previous predictions for rate cuts this year, which is a negative indicator for non-yielding assets like gold.
Central Bank Purchasing Habits Support Gold Prices
In spite of current weaknesses, the long-term outlook for Gold is positive due to ongoing structural demand bolstered by consistent central bank purchases, increasing sovereign debt levels, and resilient retail investment via exchange-traded funds (ETFs).
Recent data from Bloomberg indicates that China’s central bank acquired around 160,000 troy ounces (approximately five tons) of Gold in March, marking the 17th consecutive month of purchases. In the first two months of the year, global central banks added a net total of 25 tons, according to the World Gold Council (WGC).
Technical Analysis: Bearish Flags Signal Caution
From a technical standpoint, the 4-hour chart reveals that XAU/USD is forming a bearish flag pattern. As prices test the lower boundary of this pattern, downside risks are increasing. The 100-period Simple Moving Average (SMA) near $4,654 crucially acts as resistance, stifling efforts for upward movement. A significant breakthrough above this level could lead to a rally towards the 200-period SMA at approximately $4,908.
Conversely, the 50-period SMA around $4,585 provides some support, but a sustained dip below this level may trigger deeper losses, potentially towards the $4,400 region, with further declines extending to $4,100.
The momentum indicators present a mixed picture; the Relative Strength Index (RSI) is around the 50 mark, denoting a lack of concrete directional bias, while the Moving Average Convergence Divergence (MACD) histogram remains in the negative territory. With the MACD line positioned below its signal line and close to the zero line, this suggests weak downside pressure without significant selling momentum.
Summary
In summary, Gold’s trading trajectory remains uncertain, heavily influenced by external geopolitical factors and economic indicators. With traders remaining cautious ahead of critical deadlines, the interplay of inflation expectations and a robust US Dollar continues to shape market dynamics. Meanwhile, sustained central bank purchasing underpins a positive long-term outlook for Gold, despite current volatility.
Stay informed as developments unfold, particularly in response to geopolitical events and economic data releases, which could sway Gold prices significantly.
