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Gold pauses recovery as traders await clarity on US-Iran peace deal

  • Gold consolidates after Thursday's rebound but remains on track for a second straight week of losses.
  • Traders await fresh updates on US-Iran negotiations after Trump said an agreement could be signed soon.
  • Technically, XAU/USD remains bearish, with the RSI near 35 indicating subdued upside momentum.

Gold (XAU/USD) consolidates on Friday as traders await further developments on a potential US-Iran peace deal. At the time of writing, XAU/USD is trading around $4,200 after climbing to an intraday high of $4,246 earlier in the day.

US President Donald Trump said on Thursday that he had canceled planned military strikes on Iran and claimed a peace agreement could be signed as soon as this weekend.

Trump's statement lifted market sentiment, helping Gold rebound from a nearly seven-month low of $4,023, as the US Dollar (USD) and Oil prices lost ground.

Iranian Foreign Minister Abbas Araghchi said the Memorandum of Understanding (MoU) with the United States has “never been closer” while urging media not to speculate about its contents.

Bullion is struggling to extend the previous day's gains as Tehran has yet to announce a final decision. The upside also appears limited after this week's US inflation data reinforced expectations that the Federal Reserve (Fed) may need to keep interest rates higher for longer. Higher borrowing costs tend to weigh on non-yielding assets such as Gold.

The Consumer Price Index (CPI) climbed to 4.2% YoY in May from 3.8% YoY in April, marking its highest level since April 2023. The Producer Price Index (PPI) rose 6.5% YoY from 5.7%, its strongest pace since November 2022.

Hawkish Fed expectations and lingering doubts over whether a US-Iran agreement is imminent also help limit losses in the Greenback, leaving the precious metal on track for a second straight weekly loss.

The US Dollar Index (DXY), which measures the Greenback's value against a basket of six major currencies, trades around 99.78, holding modest intraday gains.

On the data front, the preliminary University of Michigan Consumer Sentiment Index improved to 48.9 in June from 44.8 in May, exceeding market expectations of 46. Meanwhile, one-year and five-year inflation expectations eased to 4.6% and 3.4%, respectively, from 4.8% and 3.9%.

Technical analysis: Bears stay in control as RSI signals weak momentum

XAU/USD remains in a bearish near-term bias as price holds below the 20-day Simple Moving Average (SMA) from the Bollinger Bands at roughly $4,425, leaving the recent bounce looking corrective within a broader downswing.

Momentum is weak on the daily chart. The Relative Strength Index (RSI) sits around 35, showing subdued upside momentum, while an elevated Average Directional Index (ADX) near 35 suggests the prevailing downtrend remains technically strong even as volatility compresses within the Bollinger envelope.

On the downside, initial support emerges near the lower Bollinger Band around $4,149, ahead of more substantial horizontal demand at $4,000, where buyers would be expected to defend a deeper pullback.

On the topside, a recovery would first face resistance at the Bollinger mid-line / 20-day SMA near $4,425, with a further barrier at the upper Bollinger Band near $4,701, which together define the key zone that bulls would need to reclaim to ease the current bearish tone.

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

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

Author

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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