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Gold Retreats as US Dollar Stabilises Amid Ongoing Geopolitical Tensions
Gold (XAU/USD) experienced a pullback on Wednesday as the US Dollar (USD) began to stabilise after a seven-day losing streak. This shift occurred against the backdrop of ongoing geopolitical tensions, particularly regarding developments in the Middle East. At the latest update, XAU/USD is trading at approximately $4,813, having recently peaked at a one-month high of $4,871 during the Asian trading session.
Renewed hopes for negotiations between the United States and Iran were bolstered by comments from US President Donald Trump in a Fox Business interview, stating that the “Iran war can be over very soon.” There are reports indicating a potential second round of peace talks could occur as soon as this week, coinciding with the expiration of the current two-week ceasefire.
Despite cautious optimism, uncertainties remain. The Washington Post reports that the Pentagon is preparing to deploy additional troops to the Middle East, ramping up pressure on Iran as the US seeks a diplomatic resolution. This scenario keeps market sentiment fragile, with hopes for peace countered by military readiness.
Simultaneously, the US blockade of the Strait of Hormuz persists, restricting oil supply and preventing substantial decreases in crude prices. West Texas Intermediate (WTI) crude is currently trading near $90, rebounding after a three-day decline that saw prices drop to a three-week low of approximately $85 earlier in the day.
Admiral Brad Cooper, Commander of US Central Command (CENTCOM), indicated that “US forces have completely halted economic trade going into and out of Iran by sea.” In response, Iran’s Revolutionary Guards threatened to block maritime traffic in the Gulf and the Sea of Oman if the US blockade on Iranian vessels continues.
While oil prices are elevated, their pullback from recent highs has alleviated some inflation concerns, which could diminish pressure on the Federal Reserve (Fed) to tighten monetary policy. This change in expectations might benefit gold, particularly as investors anticipate potential interest rate cuts.
However, uncertainty about the Fed’s future actions lingers as the market assesses the economic fallout from the Middle East conflict. Current expectations suggest that the Federal Reserve may maintain its interest rates in the near future, which could hinder gold’s allure as a safe-haven asset despite increased geopolitical risks.
Technical Analysis: XAU/USD Faces Resistance
From a technical standpoint, the 4-hour chart indicates that buyers are facing challenges in extending gains above the 200-period Simple Moving Average (SMA) around $4,839. Nevertheless, gold is holding above the 100-period SMA, positioned around $4,632, maintaining a largely range-bound trading environment with a slight bullish inclination.
The Relative Strength Index (RSI), currently at 57, supports a positive outlook without indicating overbought conditions. Furthermore, the Moving Average Convergence Divergence (MACD) remains in positive territory, suggesting ongoing upward momentum even as prices approach longer-term resistance levels.
Should gold surpass the 200-period SMA decisively, this could trigger a breakout from the current trading range, with potential gains targeting the $5,000 threshold. In contrast, the immediate support level is at the current price around $4,800, with significant support likely at the 100-period SMA of $4,632.70, where buyers may re-enter the market in line with the prevailing bullish trend.
Current US Dollar Performance
In a broader context, the US Dollar has shown strength against several major currencies. Below is a summary of percentage changes for the USD against other key currencies today:
| Currency | Change (%) |
|---|---|
| EUR | +0.14 |
| GBP | +0.13 |
| JPY | +0.21 |
| CAD | +0.07 |
| AUD | -0.22 |
| NZD | +0.11 |
| CHF | +0.22 |
This table highlights the performance of the US Dollar, showing it as notably strong against the Swiss Franc while slightly weaker against the Australian Dollar.
In summary, while gold faces headwinds from Fed policies and geopolitical uncertainties, the evolving situation in the Middle East and expectations around interest rates could significantly influence its trajectory in the coming weeks. Investors are advised to keep a close watch on both technical indicators and geopolitical developments.
