Gold Price Forecast: XAU/USD rebounds as Middle East war escalates, but not out of woods yet
- Gold rebounds from six-week lows of $4,807 in Thursday’s Asian trades, as the Middle East war enters a new phase.
- The US Dollar sees a profit-taking pullback after the Fed’s hawkish hold-led advance.
- Technically, Gold closes below key support levels on Wednesday, with more downside likely amid a bearish RSI.
Gold is on a recovery mode from six-week lows of $4,807 reached on Wednesday, as buyers try their luck amid renewed escalation of the Middle East war.
Gold finds dip-buyers, will the rebound last?
Having lost near 4% on Wednesday, Gold is finding its feet early Thursday, helped by the resurgent demand for the bullion as a traditional safe haven, with the war in the Middle East entering a new phase.
Investors remain wary as Israel and Iran attack energy infrastructure in the region in a tit-for-tat game, as the war deepens.
Iran attacked gas facilities in Qatar, the United Arab Emirates (UAE) and Saudi Arabia, retaliating to Israel’s strikes against Iran’s South Pars offshore natural gas field shared with Qatar.
Meanwhile, Reuters reported, citing sources, the Trump administration is considering deploying thousands of additional United States (US) troops to the Middle East.
Additionally, traders resorted to cashing in on their Gold shorts after the bright metal was sold into the US Federal Reserve’s (Fed) hawkish monetary policy announcements.
However, any upside in Gold appears short-lived as markets continue to assess the Fed’s hawkish hold decision from Wednesday.
The Fed held key policy rates steady, as widely expected, with the Dot Plot chart still projecting one rate cut for 2026 and 2027.
Fed Chair Jerome Powell struck a cautious tone in a press conference, noting that “the forecast is that we will be making progress on inflation, not as much as we had hoped, but some progress on inflation.”
"In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy., he added.”
Furthermore, the US Dollar (USD) is expected to remain the go-to safety bet if the war intensifies, with the US also targeting Iran’s oil and gas facilities. This scenario could revive Gold sellers, fuelling a fresh leg down in the bullion.
Also, the Bank of Japan (BoJ) monetary policy decisions could have a significant impact on the USD/JPY pair, which could move the USD and in turn, Gold price.
The BoJ is widely expected to leave rates unchanged, but the central bank’s outlook on inflation and rate hikes will hold the key and determine the next direction in USD/JPY.
Gold price technical analysis: Daily chart
The near-term bias turns mildly bearish as price slips below the 21-day Simple Moving Average (SMA) near $5,105 and pressures the 38.2% Fibonacci retracement at $4,858.82, measured from the $4,401.99 low to the $5,597.89 high. The 50-, 100- and 200-day SMAs trend higher beneath price, keeping the broader uptrend intact but now serving more as medium-term rather than immediate directional drivers. The Relative Strength Index (RSI) at 40.45 leans lower but holds above oversold territory, suggesting downside momentum is building without yet signalling capitulation.
Initial resistance emerges at the 38.2% retracement at $4,858.82, with the 50.0% retracement at $4,999.94 reinforcing a stronger barrier aligned with the 21-day SMA overhead. A daily close back above $4,999.94 would ease current bearish pressure and open the path toward the 61.8% retracement at $5,141.05. On the downside, immediate support sits around the 23.6% retracement at $4,684.22, followed by the higher-timeframe support cluster from the 50-day SMA around $4,980 down to the 100-day SMA near $4,601, where buyers would be expected to defend the broader bullish structure.
(The technical analysis of this story was written with the help of an AI tool.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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.
