Gold rallies to one-week top as Trump de-escalation signals hit USD

Gold (XAU/USD) attracts buyers for the third straight day and rallies to a one-and-a-half-week top during the Asian session on Tuesday, though it struggles to find acceptance above the $4,600 mark. Reports that US President Donald Trump is willing to wind down the military campaign against Iran, even if the Strait of Hormuz remains largely closed, trigger a corrective pullback in Crude Oil prices. This, in turn, eases inflation concerns and keeps US Treasury bond yields on the back foot, prompting some US Dollar (USD) profit-taking and benefiting the commodity.

Meanwhile, Iran has signaled reluctance to engage in direct negotiations with the US, highlighting fragile diplomatic progress. Furthermore, the US is still deploying additional troops and assets to the region, adding to uncertainties and dampening hopes for a quick de-escalation of tensions in the Middle East. This should act as a tailwind for Crude Oil prices and keep inflation risks in play, bolstering bets for higher interest rates globally. Expectations for hawkish central banks, including the US Federal Reserve (Fed), should cap the non-yielding Gold.

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, in turn, backs the case for the emergence of dip-buying around the USD, which should contribute to keeping a lid on the Gold price. Hence, it will be prudent to wait for strong follow-through buying before positioning for an extension of the recent solid recovery from the 200-day Simple Moving Average (SMA), around the $4,100 mark, or a four-month low, touched last week.

Traders now look to the US economic docket – featuring the release of JOLTS Job Openings data and the Conference Board’s Consumer Confidence Index. This, along with speeches by influential FOMC members, will drive the USD and provide some impetus to the Gold price. The market focus, however, remains glued to geopolitical developments, which will continue to play a key role in infusing volatility around the XAU/USD pair.

XAU/USD daily chart

Gold needs to surpass 100-day SMA support-turned-resistance to back the case for further gains

From a technical perspective, the near-term bias is cautiously bearish as the Gold price hovers just under the 38.2% Fibonacci retracement of the fall from the monthly swing high. Moreover, the precious metal trades beneath the 100-day Simple Moving Average (SMA), suggesting the broader uptrend is intact but under pressure in the short term. Moreover, the 200-day SMA continues to grind higher, reinforcing longer-term bullish structure despite the pullback.

Meanwhile, the Relative Strength Index (RSI) has recovered from oversold territory to around 41, indicating easing but still subdued upside momentum. Furthermore, the Moving Average Convergence Divergence (MACD) remains below zero with negative readings, consistent with a fading bullish impulse.

Initial resistance stands at the 38.2% Fibo. retracement at $4,592.49, with the 100-day SMA near $4,637 forming the next barrier. A daily close above the latter would open a recovery toward the 50.0% retracement at $4,747.16.

On the downside, immediate support is seen near the recent lows around $4,470, ahead of the 23.6% retracement at $4,401.11, where prior price congestion aligns with the corrective structure. A break below $4,401.11 would expose the $4,200–4,150 region and bring the rising 200-day SMA at $4,129 into focus as deeper trend support.

As long as price holds above the 23.6% retracement and the 200-day SMA, the broader bullish framework survives, but failure there would reinforce the current bearish near-term bias.

(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.