Gold sticks to gains below $4,600 as de-escalation hopes temper rate hike expectations
- Gold attracts follow-through buyers as hopes for a US-Iran ceasefire temper hawkish central bank bets.
- Geopolitical risks remain in play, underpinning the USD and capping gains for the precious metal.
- The technical setup favors bullish traders and backs the case for a further near-term appreciation.
Gold (XAU/USD) retains positive bias through the first half of the European session, though it remains below the weekly high, around the $4,600 mark set earlier this Wednesday. Moreover, the precious metal remains highly sensitive to geopolitical headlines, and volatility is expected to remain elevated as investors react to further developments in the ongoing conflict. This, in turn, warrants some caution before positioning for an extension of this week's solid recovery from a technically significant 200-day Simple Moving Average (SMA) near the $4,100 mark, or a four-month low.
Reports suggest that diplomatic efforts are underway to introduce a one-month ceasefire mechanism to allow the US and Iran to negotiate a plan to end the conflict. This follows US President Donald Trump’s decision earlier this week to delay planned strikes on Iran's energy infrastructure by five days, citing indirect negotiations, fueling hopes for de-escalation of tensions in the Middle East. Adding to this, Trump said that Iran offered a "present" linked to energy flows through the Strait of Hormuz to demonstrate goodwill in negotiations. The optimism weighs on Crude Oil prices and eases inflationary concerns, tempering bets for more hawkish central banks and assisting the non-yielding Gold to attract some follow-through buyers.
The conflict, however, shows no signs of easing, with Israel continuing its strikes on the Islamic Republic and the US deploying additional troops to the region. In fact, the Trump administration has directed thousands of soldiers from the US Army's elite 82nd Airborne Division to the Middle East. Iran, on the other hand, has fired a new missile barrage at Israel, while Gulf countries also reported repeated drone and missile interceptions, as fighting intensifies in Lebanon and Iraq. This keeps investors on edge and limits the downside for Crude Oil prices. Moreover, markets continue to factor in inflation risks stemming from elevated energy prices and uncertainty around the interest rate trajectory, which, in turn, acts as a headwind for the Gold price.
Meanwhile, traders have nearly fully priced out the possibility of any further interest rate cuts by the US Federal Reserve (Fed) and are rapidly increasing bets for a hike by the end of this year. The hawkish outlook offers some support to the US Dollar (USD) and might further cap the XAU/USD pair. Hence, it will be prudent to wait for strong follow-through buying before confirming that the Gold price has formed a near-term bottom and positioning for any further appreciating move.
XAU/USD 1-hour chart
Gold bulls await move beyond $4,600 before placing fresh bets amid supportive technical setup
From a technical perspective, an intraday breakout through the 100-hour SMA could be seen as a key trigger for bullish traders. The subsequent move up, however, stalls near the 38.2% Fibonacci retracement level of the downfall from the March swing high, warranting some caution before positioning for any further appreciating move for the Gold price.
Meanwhile, the Moving Average Convergence Divergence (MACD) histogram remains positive with the line above its signal, reinforcing upward momentum. Moreover, the Relative Strength Index (RSI) hovers in the high 60s, showing firm but not extreme bullish pressure that keeps buyers in control on intraday dips.
A sustained break and acceptance above the $4,600 mark will reaffirm the constructive outlook, paving the way toward the next upside objective near $4,637 en route to the mid-$4,750 zone aligned, where the 50.0% retracement caps the broader rebound. On the downside, immediate support is located at $4,470, with stronger follow-through demand expected around $4,401 at the 23.6% retracement, where prior consolidation and Fibonacci structure converge.
A drop below $4,401 would weaken the current bullish bias and expose a deeper retracement toward the $4,250–$4,300 region, while holding above these supports keeps the intraday uptrend intact.
(The technical analysis of this story was written with the help of an AI tool.)
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
