Gold Price Forecast: XAU/USD remains a lose-lose trade despite the US-Iran peace deal
- Gold extends three-day losing streak below $4,200, eyes third straight weekly loss.
- The US Dollar sits at yearly highs amid hawkish Fed outlook, renewed Iran tensions.
- Technically, Gold remains vulnerable, with a retest of $4,000 likely on the cards.
Gold is refreshing weekly lows near $4,175 in Friday’s Asian session as sellers refuse to give up and look to clinch a third straight weekly loss.
Gold looks south amid a bullish US Dollar
Gold has shrugged off optimism surrounding a peace deal signed between the United States (US) and Iran, as renewed tensions erupt following a CNN report that US Vice President JD Vance cancelled his planned trip to Switzerland for talks with Iran.
This, combined with hawkish expectations around the US Federal Reserve (Fed) interest rate outlook, continues to support the US Dollar (USD), helping the buck stay at its highest level in over a year against its six major currency rivals.
The Fed on Wednesday held the benchmark policy rates between 3.5%-3.75%, as widely expected. But the updated Summary of Economic Projections (SEP), the so-called dot plot chart, showed a major hawkish shift, with nine Fed officials forecasting at least one interest rate increase this year.
The central bank also removed language from its monetary policy statement that had suggested its next move would be a rate cut.
Looking ahead, Gold appears in a lose-lose situation as increased bets for Fed rate hikes could keep the USD underpinned, increasing the opportunity cost of holding the bullion in foreign currencies.
Additionally, Gold’s technical setup on the daily chart favors sellers, keeping any recovery in the metal as a good selling opportunity.
However, end-of-week flows and short-covering could provide some temporary relief to Gold optimists as a big week draws to an end.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,178.77, extending a bearish near-term bias as spot holds decisively below all its major moving averages. The 21-day simple moving average (SMA) at $4,365.31, the 50-day SMA at $4,540.91 and the 100-day SMA near $4,721.48 all sit overhead, reinforcing a capped tone alongside the 200-day SMA at $4,466.67, which now aligns with the broader bearish structure. The Relative Strength Index (14) around 37 remains in negative territory but off oversold extremes, hinting that downside momentum persists, though without fresh capitulation.
On the topside, initial resistance emerges at the 21-day SMA around $4,365, followed by the 200-day SMA near $4,467 and then the 50-day SMA at roughly $4,541, with the 100-day SMA up at $4,721 acting as a more distant barrier. As long as gold remains lodged beneath this layered band of daily moving-average resistance, rallies are likely to be sold and the downside bias will prevail, with traders watching for any loss of momentum as a signal of potential basing rather than a confirmed reversal.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
