Gold bulls seem hesitant as bets for higher rates globally cap the upside
- Gold attracts some dip-buyers at the start of a new week, though the upside seems limited.
- A modest USD downtick supports the XAU/USD pair, while hawkish central banks cap gains.
- The technical setup favors bearish traders as the commodity stays below the 100-day SMA.
Gold (XAU/USD) turns higher for the second straight day following an intraday slide to the $4,420 area and climbs to a fresh daily high, around the $4,550 region during the first half of the European session on Monday. The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, retreats slightly from the vicinity of the monthly high and turns out to be a key factor offering some support to the commodity. However, expectations of higher interest rates globally might keep a lid on any further appreciation for the non-yielding yellow metal.
Investors now seem convinced that major central banks will adopt a more hawkish stance as the war-driven surge in energy prices continues to fuel inflationary fears. The fears were further fueled by reports that the US is considering a ground invasion of Iran and the entry of Yemen's Houthis. The Iran-backed militant group launched missile and drone attacks on Israel in the space of less than 24 hours and warned that further attacks would follow in the coming days. This opens a new front in a rapidly escalating conflict that has rattled the global economy, raising the risk of further disruption to global trade passing through the Bab el-Mandeb Strait off the Red Sea. This, along with the effective closure of the Strait of Hormuz, remains supportive of elevated Oil prices and threatens to rekindle inflationary pressures.
Meanwhile, the Organization for Economic Co-operation and Development (OECD) raised its forecast for US inflation and now estimates headline prices to rise at a 4.2% rate, far above its prior forecast and the Fed's expectations for 2.7%. Moreover, the OECD said that its baseline forecast is the Fed keeping the policy rate flat through 2027. That said, the CME Group's FedWatch tool indicates over a 50% chance of a rate increase by the US central bank in 2026. This favors the USD bulls and warrants caution before positioning for any further upside for the Gold price. Even the technical setup makes it prudent to wait for strong follow-through buying before confirming that the XAU/USD pair has formed a near-term bottom around the $4,100 mark, or the lowest since November 2025, touched earlier this month.
(This story was corrected on March 30 at 06:40 GMT to say that increasing chances of a rate increase by the US central bank in 2026, not 2025.)
XAU/USD daily chart
Gold might struggle to make it through 100-day SMA pivotal hurdle
The range-bound price action witnessed over the past week or so might be categorized as a bearish consolidation phase amid the recent breakdown below the 100-day Simple Moving Average (SMA). Last week's solid rebound from the very important 200-day SMA pivotal support, however, warrants some caution before placing fresh bearish bets.
Meanwhile, the Moving Average Convergence Divergence (MACD) line remains below its signal line and in negative territory, with a still-negative histogram, reinforcing persistent downward momentum. The Relative Strength Index (RSI) hovers in the mid-30s after recovering from oversold readings, hinting that bearish pressure is easing but not yet reversing.
Immediate resistance emerges near the 100-day SMA around $4,630, with a break above this area needed to open the way toward $4,880 as the next upside barrier. On the downside, initial support stands at the recent low near $4,380, where prior selling stalled, followed by a lower support zone at $4,300 if sellers extend control.
(The technical analysis of this story was written with the help of an AI tool.)
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
