Gold bulls retain intraday control as Iran diplomacy hopes weigh on USD ahead of US PPI

Gold (XAU/USD) touches a fresh daily high during the first half of the European session on Tuesday, though it lacks follow-through and remains below the $4,800 mark. Despite failed US-Iran peace talks over the weekend, investors seem hopeful that the door for diplomacy remains open and that negotiations will continue. Apart from this, the uncertainty over future interest rate moves by the US Federal Reserve (Fed) weighs on the US Dollar (USD). This helps the bullion to build on the previous day's goodish rebound from sub-$4,650 levels.

US Vice President JD Vance struck a cautiously optimistic tone on negotiations with Iran and said during an interview on Fox News that meaningful progress has been made, even as talks have yet to deliver a breakthrough. Vance further added that the framework for a comprehensive agreement is achievable if Iran is willing to take the next step. The optimism, in turn, remains supportive of a generally positive risk tone and undermines the Greenback's global reserve currency status, benefiting USD-denominated commodities, including Gold.

Meanwhile, an energy shock caused by widening conflict in the Middle East has been fueling worries around a possible spike in inflationary pressures. Moreover, data released on Friday showed that the US consumer inflation rose by the most in nearly four years in March due to the war-driven surge in energy prices, shifting focus on potential rate hikes this year. However, the CME Group's FedWatch Tool is indicating a 30% chance of a 25-basis point (bps) rate cut in December, which further undermines the USD and benefits the non-yielding Gold.

The aforementioned supportive factors lift the XAU/USD pair to the $4,777 area in the last hour, though the uptick lacks bullish conviction amid the continued instability in the Strait of Hormuz. US President Donald Trump said that the U.S. Navy blockade on the strategic waterway has officially started and vowed to destroy Iranian warships that get nearby. Iran responded with threats on all ports in the Persian Gulf and the Gulf of Oman. This keeps geopolitical risks in play, which holds back the USD bears from placing aggressive bets and caps the Gold price.

XAU/USD 4-hour chart

Gold could aim to test 200-SMA on H4 once $4,800 pivotal hurdle is cleared

Against the backdrop of the previous day's goodish rebound, a subsequent strength beyond the 50% retracement level of the March downfall could be seen as a key trigger for the XAU/USD bulls. The precious metal, however, remains capped beneath the 200-period Simple Moving Average (SMA) at $4,854.58, which keeps the broader tone mildly bearish.

Meanwhile, the Relative Strength Index (RSI) near 57 leans to the bullish side of neutral, while the Moving Average Convergence Divergence (MACD) histogram has contracted toward the zero line. This, in turn, suggests that the downside pressure is waning but not yet convincingly reversed.

Hence, any subsequent move up might continue to confront initial resistance located at the 200-period SMA around $4,855, followed by the 61.8% Fibonacci retracement at $4,913. A break above the latter would open the way toward $5,133 and the $5,413 cycle high.

On the downside, immediate support is seen at the 50% retracement near $4,759, with additional cushions at the 38.2% level at $4,604 and then $4,413. A drop through these Fibonacci floors would expose the broader structural base toward $4,104.

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