Middle East war takes its toll on Gold prices

XAU/USD Current Price: $4,345 

• Fresh United States attacks on Iran fueled speculation about mounting inflationary pressures.
• The yield on the 10-year US Treasury bond surged to its highest in over a year.
•  XAU/USD trades at fresh two-week lows and aims to extend its slump.

The US Dollar (USD) accelerates its advance against the precious metal in the American session on Tuesday, following news indicating United States (US) forces launched attacks on Islamic Revolutionary Guard Corps (IRGC) targets in Iran, as reported by the US Central Command (CENTCOM). Explosions were reported on Qeshm Island, around the Strait of Hormuz, and across southern Iran.  

Crude Oil prices soared with the headlines, while bond yields followed through amid prospects of mounting inflationary pressures leading to interest rate hikes. The yield on the 10-year US Treasury bond surged to its highest since January 2025, currently hovering around 4.79%.

 The US decision to strike its rival came after recent attacks on commercial vessels and US personnel in the region. Also, US President Donald Trump was said to be considering a CENTCOM  plan for limited attacks aimed at preventing Tehran from rebuilding radar and missile capabilities.

Earlier in the day, the US reported that the manufacturing sector lost some momentum, as the August ISM Manufacturing Purchasing Managers’ Index (PMI) fell from 55.6 in July to 54.6, also missing expectations of 55.2. Additionally, the number of job openings rose slightly to 7.271 million in July from 7.182 million in June, according to the JOLTS Job Opening report. The reading also came below expectations of 7.3 million.

XAU/USD Technical Outlook:

In the four-hour chart, XAU/USD is bearish, as it holds below both the 20-period Simple Moving Average (SMA) at $4,474.45 and the 100-period SMA at $4,482.54. The metal is still supported by the 200-period SMA at $4,295.85, but downside pressure dominates, with the Relative Strength Index (RSI) indicator heading firmly south, despite being in oversold territory.

Technical readings in the daily chart support the bearish case as the pair extends its slide below the 100-day SMA at $4,365.54, after failing to recover beyond the 20-day SMA at $4,443.71. The same chart shows that the Momentum indicator has slipped into negative territory, while the RSI pierces its midline, hinting at mounting selling pressure.

On the topside, initial resistance is seen at the 20-period SMA at $4,474.45, followed by the 100-period SMA at $4,482.54, where recovery attempts could stall. On the downside, immediate support aligns with the current price area near $4,345.41, ahead of the more significant 200-period SMA at $4,295.85, a break of which would open the door to a deeper corrective leg despite the already oversold momentum backdrop.

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