Gold holds above $4,800 as Hormuz risks support USD and cap further gains
- Gold regains some positive traction following the previous day’s pullback from a four-week top.
- Hormuz risks counter Iran diplomacy hopes, which support the USD and cap the commodity.
- Fading Fed rate hike bets could limit any meaningful USD upside and favor the XAU/USD bulls.
Gold (XAU/USD) trims part of its modest intraday gains, albeit it retains a positive bias and trades above the $4,800 mark through the first half of the European session on Thursday. Despite hopes for Iran diplomacy, the instability in the Strait of Hormuz offers some support to the safe-haven US Dollar (USD), which turns out to be a key factor acting as a headwind for the commodity.
The US naval blockade of Iranian ports, imposed after the end of the Islamabad talks last Saturday, has been fully implemented. Moreover, the leader of Iran’s joint military command said that its military could halt trade in the Gulf region if the US does not lift its blockade. Iran has also demanded an end to Israeli attacks on Lebanon as a precondition for further talks with the US. However, Israel's Prime Minister, Benjamin Netanyahu, indicated that he had not committed to a ceasefire and said that he instructed the IDF to continue thickening the security zone. This keeps geopolitical risks in play and underpins the USD's reserve currency status, capping gains for the Gold.
Meanwhile, expectations for diplomatic efforts to end the conflict remain supportive of the prevailing risk-on mood and keep Crude Oil prices well within striking distance of a three-week low set on Tuesday. US President Donald Trump said that he believes the war with Iran may be coming to a conclusion soon, while the White House expressed optimism about reaching a deal to end the conflict. Moreover, reports suggest that there are growing prospects for a second round of peace talks between the US and Iran that could take place in a matter of days. This, along with easing concerns about the inflationary impact of the war-driven surge in energy prices, tempered hawkish US Federal Reserve (Fed) expectations.
According to the CME Group's FedWatch Tool, late 2026 remains the primary window for potential easing by the US central bank. This, in turn, holds back the USD bulls from placing aggressive bets and keeps the non-yielding Gold close to a nearly four-week high, touched the previous day. Moreover, the mixed fundamental backdrop warrants caution before positioning for any meaningful downside for the XAU/USD pair.
XAU/USD 4-hour chart
Gold continues with its struggle to make it through 200-SMA pivotal resistance
The XAU/USD pair remains just under the 200-period Simple Moving Average (SMA) at $4,831.22, which acts as immediate overhead resistance and keeps the rebound in check. Meanwhile, the Moving Average Convergence Divergence (MACD) has turned positive, and the Relative Strength Index (RSI) hovers near 60. This hints at firm but not overheated bullish momentum that has yet to overpower the prevailing structural cap.
Hence, it will be prudent to wait for sustained strength and acceptance above the 200-SMA barrier before positioning for further gains to $4,916.20, or the 61.8% Fibonacci retracement level of the March downfall. A sustained break above the latter would be needed to ease the current ceiling and open the way toward $5,136.01 and then the cycle high area around $5,416.01.
On the downside, first support is aligned with the 50% retracement at $4,761.81, with additional layers of demand at the 38.2% Fibo. level near $4,607.41 and the 23.6% Fibo. around $4,416.39. The said support level would come into play if sellers regain control beneath the current consolidation.
(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.
