Gold hangs near daily low as USD stays firm on Hormuz risks; bears seem hesitant
- Gold remains on the defensive, though it lacks follow-through selling amid mixed cues.
- The USD is underpinned by Hormuz risks and acts as a headwind for the precious metal.
- Iran diplomacy hopes and fading Fed rate hike bets cap the USD, supporting the bullion.
Gold (XAU/USD) sticks to a negative bias for the third straight day on Friday and remains depressed below the $4,800 mark through the first half of the European session. Despite intensifying diplomatic efforts to end the Middle East conflict, signs of friction between the US and Iran remained due to the ongoing American naval blockade of Iranian ports. This, in turn, is seen underpinning the US Dollar's (USD) reserve currency status and acting as a headwind for the commodity.
Meanwhile, a 10-day truce between Israel and Lebanon fueled hopes about a potential US-Iran peace deal. In fact, US President Donald Trump struck an optimistic note and told reporters on Thursday that Iran was close to making a deal. According to the Wall Street Journal, Washington and Tehran have agreed in principle to hold fresh talks, though neither side has set a time or venue for the meeting. Nevertheless, the developments remain supportive of a positive risk tone, which, along with diminishing odds for a rate hike by the US Federal Reserve (Fed), caps the USD recovery from its lowest level since late February and assists Gold to reverse a dip to the $4,768-$4,767 region.
The US Producer Price Index (PPI) released earlier this week eased concerns about the inflationary impact of the war-driven surge in energy prices. Adding to this, bets for a further de-escalation of tensions in the Middle East keep Crude Oil prices on the defensive and temper hawkish Fed expectations. Traders are currently pricing in a roughly 30% chance of a Fed rate cut by the year-end, holding back traders from positioning for any further USD gains, and lending support to the non-yielding yellow metal. Hence, it will be prudent to wait for some follow-through selling before positioning for an extension of this week's pullback from a nearly one-month high.
Moving ahead, there isn't any relevant market-moving economic data due for release from the US on Friday, leaving the USD at the mercy of speeches from influential FOMC members. The focus, however, will remain glued to another round of US-Iran peace talks, which could take place this weekend. The incoming headlines might continue to infuse volatility in the financial markets and produce some meaningful opportunities around the Gold. Nevertheless, the XAU/USD pair remains on track to post modest gains for the fourth straight week.
(This story was corrected on April 17 at 08:45 GMT to say that the XAU/USD pair remains on track to post modest gains for the fourth straight week, not third.)
XAU/USD 4-hour chart
Gold bears retain control as Thursday's failure near 200-period SMA barrier on H4 remains in play
From a technical perspective, the overnight failed attempt to conquer the 200-period Simple Moving Average (SMA) on the 4-hour chart warrants some caution for bullish traders. The subsequent slide, however, stalls ahead of the 50% retracement level of the March fall, making it prudent to wait for some follow-through selling below the $4,765 support zone before positioning for any further losses.
Meanwhile, momentum indicators are mixed, with the Relative Strength Index (RSI) hovering near a neutral 50 and the Moving Average Convergence Divergence (MACD) slipping further below the zero line with a negative reading. This hints that sellers retain the tactical advantage unless price can reclaim key 200-period SMA resistance, around $4,814. This is followed by a stronger Fibonacci barrier at the 61.8% retracement near $4,912. A sustained break above these hurdles would be needed to ease the current bearish tone and open the way toward $5,130 and $5,409.
On the downside, initial support is aligned with the 50.0% retracement at $4,759, and a break below this level would expose the next Fibonacci floors at $4,606 and then $4,416, where buyers would be expected to show more interest in defending the broader uptrend structure.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
