Gold Price Forecast: XAU/USD stretches towards $4,600 as Iran peace hopes hit the USD

XAU/USD reaches session highs near $4,580 from last week's lows near $4,450.
Comments of avances in the US-Iran negotiations have hit the safe-haven US Dollar.
An inverted Head & Shoulders hints at further recovery.

Guillermo Alcala FXStreet

Gold (XAU/USD) is trading higher on Monday, favoured by a moderate risk appetite amid recent comments from the US and Iran hinting at progress in peace negotiations. Gold has extended its recovery from last week’s lows, near $4,450, to session highs at $4,579 on Monday, as the US Dollar Index retreated to the bottom of last week’s trading range.

US President Donald Trump and Secretary of State Marco Rubio have reported some advances in the negotiations with Tehran, yet discarding an immediate breakthrough and warning that the US blockade of the Strait of Hormuz will remain in place until the deal is signed and sealed.

On Monday, a spokesperson from Iran’s Foreign Ministry affirmed that both parties are negotiating the end of the war and assured that nuclear negotiations are off the table, which feeds hopes of a swifter agreement. He also reiterated that the Strait of Hormuz should be managed by coastal countries.

Technical Analysis: A bullish Head & Shoulder is in progress

XAU/USD trades at $4,572, keeping a mildly bullish near-term tone, with price action forming an inverted Head and Shoulders (H&S) pattern, which is considered a bullish figure. The Relative Strength Index (RSI) at 58.93 leans toward positive momentum, and the Moving Average Convergence Divergence (MACD) has turned decisively higher in positive territory, which together suggest buyers are gradually regaining control.

The precious metal, however, will not be out of the woods until the H&S neckline, now around $4,575, and the top of last week's trading range, at the $4,590 area, are broken. Further up, the next targets would be the previous support level around $4,640, and May's top at the $4,770 area.

On the downside, session lows are at the $4,530 area, which is likely to hold bears ahead of last week's lows at the mentioned $4,450 area. A break below here negates this view and exposes the March 23 lows near $4,350.

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

Gold FAQs

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

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