Gold Price Forecast: XAU/USD sellers retain control whilst below 21-day SMA near $4,650
- Gold snaps the previous rebound and returns to the red early Tuesday amid uncertainty over the US-Iran crisis.
- The US Dollar finds renewed haven demand on tepid risk tone, inflation fears and Fed rate hike bets.
- Gold looks to retest the falling wedge resistance-turned-support at $4,460 for a sustained downtrend.
Gold is back in the red around $4,550 in Asia on Tuesday, having faced rejection once again just shy of the $4,600 mark, as markets digest the latest developments around the conflict between the United States (US) and Iran.
Gold: Downside pressure persists
Gold sellers fight back control, following a brief reversal seen in the second half of Monday’s trading.
Despite US President Donald Trump delaying military attacks on Iran, uncertainty prevails on the revised Iranian proposal to end the war, as they contain the same conditions earlier rejected by Trump.
The US President said via a Truth Social post on Monday that the US would be “probably satisfied” if it could reach an agreement with Iran that prevents Tehran from obtaining a nuclear weapon.
Markets refuse to buy into Trump Always Chickens Out" (TACO) trade this time, remaining cautious as safe-haven flows fuel demand for the world’s reserve currency, the US Dollar (USD), yet again.
The resurgent Greenback’s demand acts as a headwind for the USD-denominated Gold price. Additionally, the USD draws support from increased bets for a US Federal Reserve (Fed) interest rate hike by the turn of this year, rendering negative for the non-yielding bullion.
The protracted US-Iran conflict and the extended closure of the Strait of Hormuz have sent Oil prices into an upward spiral, igniting inflation risks and compelling major central banks to consider hiking rates amid heightened economic slowdown concerns.
That being said, the next move in Gold clearly hinges on further updates around the Middle East conflict. In the meantime, if concerns over stagflation risks return to the fore, US Treasury bond yields could resume their uptrend at the expense of the yieldless Gold.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,554.78, keeping a bearish near-term bias as it sits below the medium- and longer-term moving averages while momentum remains soft with the Relative Strength Index (14) around 41. The pair is capped by the 21-day simple moving average (SMA) near $4,650 and the 50-day SMA close to $4,705, suggesting rallies are likely to meet supply while price holds under this cluster of overhead resistance.
On the topside, initial resistance emerges at the 21-day SMA around $4,650, followed by the 50-day SMA near $4,705, a zone that would need to be reclaimed to ease the current downward pressure. On the flip side, the falling wedge resistance-turned-support around $4,460 is the first notable downside cap ahead of the 200-day SMA near $4,358, where buyers could attempt to stem deeper losses if the metal extends its retreat.
(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.
