Gold recovers as sellers fail to hold below $4,600, USD and yields ease

Gold (XAU/USD) stages a rebound on Thursday and trims most of its intraday losses as sellers fail to sustain a move below the $4,600 level, while easing US Dollar (USD) and Treasury yields provide additional support. At the time of writing, XAU/USD is trading around $4,660, recovering after sliding to $4,554 during the European session.

Gold remains sensitive to Middle East headlines

Risk sentiment improved somewhat after reports that Iran is working with Oman to manage traffic through the Strait of Hormuz. According to Tasnim, an Iranian deputy foreign minister said Tehran and Oman are drafting a joint protocol to ensure safe maritime passage through the Strait in the post-war period.

Earlier in the day, the metal had slid as much as 4% after US President Donald Trump signaled continued military action in his address to the nation. Trump said the US is “on track to complete all of America’s military objectives shortly — very shortly,” while warning that Washington would “hit them extremely hard over the next two to three weeks” and “bring them back to the stone ages.” Trump added that discussions are ongoing, stating, “We have all the cards; they have none.”

This raises the risk of a prolonged conflict and continued disruptions to energy flows through the Strait of Hormuz, keeping Oil prices elevated.

Hawkish interest rate outlook remains a headwind for Gold

Rising inflation and growth risks linked to higher energy prices are prompting a more hawkish outlook from central banks, particularly the Federal Reserve (Fed), which is offsetting the metal’s appeal as a safe-haven asset.

The “higher-for-longer” interest rate narrative has remained a key headwind for the non-yielding metal since the Middle East war began, as higher rates increase the opportunity cost of holding Gold. According to the CME FedWatch Tool, markets widely expect the Fed to keep rates unchanged at 3.50%-3.75% this year, compared to earlier expectations of at least two rate cuts.

Fed officials struck a cautious tone this week, signaling that policymakers are in no rush to adjust interest rates despite rising inflation risks driven by energy prices.

St. Louis Fed President Alberto Musalem said on Wednesday that monetary policy is “well positioned” and should remain in place “for some time,” while noting that risks to both inflation and employment are skewed to the downside. He also described the economic outlook as “highly uncertain."

Kansas City Fed President Jeffrey Schmid said on Tuesday that the central bank must “follow through with policy actions to validate stable medium- and long-term inflation expectations.” Schmid added that he “can’t assume inflation from higher oil prices will be transitory."

Technical analysis: XAU/USD forms a bearish flag on the 4-hour chart

From a technical perspective, XAU/USD remains tilted to the downside in the near term. On the 4-hour chart, prices have failed to sustain a move above the 100-period Simple Moving Average (SMA) around $4,711, keeping the bearish bias intact.

Price action appears to be forming a bearish flag pattern, with price bouncing off the lower boundary. Momentum deteriorates as the Relative Strength Index (RSI) retreats toward the 50 line from overbought territory, while the Moving Average Convergence Divergence (MACD) histogram turns slightly negative as the MACD line crosses below the signal line, reinforcing fading upside momentum.

Immediate support is seen around the $4,600 level, followed by the 50-period SMA near $4,534. A break below this zone could open the door for further downside toward the $4,200-$4,000 region.

On the upside, a move above the 100-period SMA around $4,711 or even the $4,800 mark could pave the way for a test of the next resistance near $5,000.