Gold Price Forecast: XAU/USD downside appears capped ahead of US-Iran talks

Gold is off the lows but remains under moderate selling pressure below the $5,000 threshold early Tuesday. Gold now looks to the US-Iran nuclear deal talks for a fresh trading impetus as US traders return after the long weekend.

Gold seems vulnerable amid Asia trading lull

Gold remains offered for the second straight day amid a lack of demand for Gold from key Asian centres, including mainland China, Hong Kong, etc, on account of the week-long Chinese New Year holiday season.

Additionally, the uptick in the US Dollar on Monday, courtesy of traders resorting to the rebalancing theme ahead of the Treasury International Capital (ITC) data and the triple bomb data due to hit on Friday.

The TIC data will be in focus for any cues on diminishing foreign demand for USTs and US stocks. This data could significantly impact the USD valuation, eventually impacting bullion prices.

Meanwhile, the Minutes of the US Federal Reserve’s (Fed) January monetary policy meeting will be closely scrutinized for fresh hints on the US central bank’s interest rate cut path.

Markets are currently pricing in at least two 25 basis points (bps) rate cuts by the Fed this year, as per CME Group’s FedWatch Tool.

Before these US event risks, the US-Iran talks over Tehran's nuclear programme set to take place in Geneva on Tuesday will hold the limelight.

“Iran's foreign minister met with the United Nations (UN) nuclear watchdog chief on Monday, with few clear signs of compromise from either side and the threat of U.S. military action looming,” per Reuters.

The semi-official Iranian Tasnim news agency reported that Iran's Revolutionary Guards navy conducted a drill in the Strait of Hormuz on Monday.

That being said, Gold will continue to find buyers at lower levels due to the cautious market mood heading into the US-Iran talks.

Gold price technical analysis: Daily chart

In the daily chart, XAU/USD trades at $4,962.23. The 21-day Simple Moving Average (SMA) rises above the 50-, 100- and 200-day SMAs, preserving a bullish alignment. The longer SMAs continue to advance, while price holds above them but sits beneath the 21-day SMA at $4,987.41. The Relative Strength Index (14) stands at 53.36 (neutral), easing from prior elevated readings and signaling tempered momentum.

Measured from the $5,597.89 high to the $4,401.99 low, the 50.0% retracement at $4,999.94 caps near-term upside, with the 61.8% retracement at $5,141.05 the next barrier if a break occurs. On the downside, the rising 50-day SMA at $4,660.28 supports pullbacks. A daily close above the 50% retracement could open the path toward the 61.8% area, while failure to clear the former would keep XAU/USD consolidative within the broader uptrend.

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