Gold Price Forecast: XAU/USD risks pullbacks amid oversold conditions, Gulf war

Gold is continuing its downward trajectory back under the $4,400 level early Tuesday, as the war in Middle East drags on even after US President Donald Trump’s effort to extend the ultimatum for Iran to reopen the Strait of Hormuz within 48 hours.

Gold: Vulnerable amid emerging Fed rate hike bets

Trump citied productive talks with Iran the reason behind a likely pause in attacks for five days. But Iran’s Foreign Ministry denied having “any negotiations or talks with the United States (US) during the past 24 days of the imposed war.”

These developments fuelled hopes for a de-escalation triggering intense volatility across the financial markets, especially in Gold, Silver and WTI oil.

Gold saw a quick retracement of its earlier slump to four-month troughs of $4,099 as Trump’s delay offered much-needed relief to buyers.

The bullion plunged as much as 9% before the US President’s conciliatory move, as sellers rejoiced from a further escalation in the Gulf war after the US and Iran traded escalating threats over the reopening of the Strait of Hormuz, targeting civilian and energy infrastructure.

In Tuesday’s trading so far, markets are shrugging off Trump’s backing down on a threat to "obliterate" Iran's power plants as his usual "TACO" (Trump Always Chickens Out) moment.

Therefore, risk-off flows are back in vogue alongside the bearish sentiment in Gold. Oil prices are rebounding, with market expecting the prospect of higher-for-longer energy prices.

This narrative has revived inflation concerns and ignited hopes that the US Federal Reserve (Fed) could consider lifting interest rates later this year.

The emergence of Fed rate hike bets refuels the downside pressure on the non-yielding Gold.

Additionally, the news that Israel launched fresh strikes on Tehran also provided a fresh zest to Gold sellers. The Israeli Defense Forces (IDF) said on Tuesday that it would continue operations in line with Israeli government directives until told otherwise.

Looking ahead, Gold sellers could be caught off guard once again as conditions on the daily chart remain heavily oversold, well below the 30 level. However, the developments on the war front should remain the primary driver behind Gold price movements.

Gold price technical analysis: Daily chart

The near-term bias turns bearish as the metal extends its slide below the 21-day Simple Moving Average (SMA) around $5,000 and the 50-day SMA near $4,970, breaking the prior short-term support band. Price now gravitates toward the 100-day SMA, which rises near $4,610, highlighting a transition from a previously supported uptrend to a corrective phase. The 14-day Relative Strength Index (RSI) at 26 shows oversold conditions, but its persistent drop from above 50 underscores dominant selling pressure rather than a completed downside move.

Initial resistance emerges at the former support area near $4,650, with the 21-day SMA above at roughly $5,000 reinforcing a broader supply zone on any rebound. A daily close back above the 50-day SMA around $4,970 would be needed to ease immediate downside pressure and reopen the topside toward the $5,100 area. On the downside, immediate support sits near the psychological $4,300 handle, ahead of the rising 200-day SMA around $4,100, which marks a more substantial medium-term floor. A clear break below $4,300 would extend the bearish phase toward the 200-day average and deepen the correction within the longer-term uptrend.

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