Gold Price Forecast: XAU/USD declines as Middle East tensions boost USD, rate hike bets

Gold (XAU/USD) witnessed a dramatic intraday turnaround from the $4,800 mark, or a two-week high touched this Thursday, and maintains its heavily offered tone through the early part of the European session. The global risk sentiment took a turn for the worse following US President Donald Trump's update on the Iran war, assisting the US Dollar (USD) in regaining positive traction in reaction and weighing heavily on the commodity.

In a prime-time address to the nation, Trump said the US would carry out aggressive strikes on Iran over ​the next two to three weeks if no deal is reached and energy infrastructure remains a possible target. Adding to this, a senior Iranian official denied Trump’s claim that the new regime President has asked for a ceasefire and dampens hopes for cessation of hostilities. Moreover, reports that the United Arab Emirates (UAE) is pushing for military action to reopen the Strait of Hormuz and is lobbying for a UN Security Council resolution to authorize such an operation raise the risk of a broader regional conflict. This boosts the USD's global reserve currency status and undermines the USD-denominated Gold.

Meanwhile, diminishing odds for de-escalation of tensions in the Middle East trigger a sharp rise in Crude Oil prices. Investors remain worried that elevated energy prices would rekindle inflationary pressures and force major central banks, including the US Federal Reserve (Fed), to adopt a hawkish stance. According to the CME Group's FedWatch Tool, the probability of a rate hike by the US Federal Reserve (Fed) in July exceed 50%, and odds for a hike by September have risen to around 75%. This, in turn, leads to a fresh leg up in US Treasury bond yields, which provides an additional boost to the Greenback and turns out to be another factor that contributes to driving flows away from the non-yielding Gold price.

The precious metal remains highly sensitive to geopolitical headlines, and volatility is expected to remain elevated as investors react to further developments in the ongoing Iran war. Traders, however, might further take cues from the release of the closely-watched US Nonfarm Payrolls (NFP) report on Friday. Nevertheless, the aforementioned fundamental backdrop seems tilted in favor of bearish traders and backs the case for a further near-term depreciating move for the Gold.

XAU/USD 4-hour chart

Technical Analysis:

Thursday's failure near the 200-period Exponential Moving Average (EMA) support breakpoint, now turned resistance on the 4-hour chart, and rejection near the $4,800 mark validate the negative outlook for the XAU/USD pair. Moreover, the Relative Strength Index (RSI) has eased from overbought readings above 70 to around 52, indicating that buying pressure has normalized and leaving room for further corrective downside if sellers press the move.

That said, the Moving Average Convergence Divergence (MACD) line retreats toward the signal line while both hold in positive territory, suggesting fading bullish momentum rather than outright trend reversal. Hence, it will be prudent to wait for some follow-through selling below the daily swing low, around the $4,554-4,553 area, before positioning for deeper downside toward $4,520 and then $4,440. Below that, the next bearish target aligns with prior consolidation near $4,360.

On the topside, initial resistance stands at $4,700, and recovery through this level would open the way toward $4,750. A move above the latter would challenge the broader bearish bias and put the $4,800 zone, where the 200-period EMA resides, back in focus as a pivotal ceiling.

(The technical analysis of this story was written with the help of an AI tool.)

(This story was corrected on April 2 at 08:24 GMT to say that inflation fears bolster Fed rate hike bets, not cut.)