Gold pares intraday losses and moves closer to $4,650; not out of the woods yet
- Gold attracts heavy selling on Thursday and snaps a four-day winning streak to a two-week high.
- Trump’s remarks dampen Iran de-escalation hopes and benefit the USD’s reserve currency status.
- Rallying Oil prices fuel inflation fears and bolster Fed rate hike bets, undermining the commodity.
Gold (XAU/USD) trims a part of its heavy intraday losses and recovers closer to the $4,650 region during the first half of the European session. Any meaningful upside, however, still seems elusive in the wake of a goodish pickup in the US Dollar (USD) demand. Addressing the nation, US President Donald Trump threatened that Iran would be hit extremely hard over the next two to three weeks and would be brought to the Stone Age if no deal is reached. This tempers hopes for de-escalation of tensions in the Middle East and bolsters the USD's status as the global reserve currency, which, in turn, prompted aggressive selling around the commodity.
Meanwhile, Trump added that Iranian energy infrastructure remains a possible target. Adding to this, the Wall Street Journal reported on Tuesday that the United Arab Emirates (UAE) is pushing for military action to reopen the Strait of Hormuz and is lobbying for a UN Security Council resolution to authorize such an operation. This, in turn, triggered a sharp rally in Crude Oil prices, reigniting inflationary concerns and reaffirming bets for a rate hike by the US Federal Reserve (Fed). The outlook lifts US Treasury bond yields, which provides an additional boost to the USD and should keep a lid on any attempted recovery in the Gold price.
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 Iran war. This, in turn, suggests that the immediate market reaction to the closely-watched US Nonfarm Payrolls (NFP) report on Friday is more likely to be limited. Nevertheless, the fundamental backdrop favors the XAU/USD bears and warrants some caution before positioning for the resumption of the recent goodish rebound from the $4,100 mark, or a four-month low set last week.
XAU/USD 4-hour chart
Gold could attract fresh sellers at higher levels; 200-EMA on H4 near $4,800 holds the key
From a technical perspective, Thursday's failure near the 200-period Exponential Moving Average (EMA) support breakpoint, now turned resistance on the 4-hour chart, and the $4,800 mark favors the XAU/USD bears. Moreover, the Relative Strength Index (RSI) drops back toward the mid-50s from overbought territory above 70, while the Moving Average Convergence Divergence (MACD) indicator (MACD) pulls back from recent highs, suggesting fading upside pressure rather than an outright reversal at this stage.
Meanwhile, some follow-through selling below the daily swing low near $4,554-$4,553 could drag the Gold price to the next support just below the $4,500 psychological mark, where prior demand converged with the latest momentum cool-off. A loss of this level would open the way toward $4,400. On the upside, initial resistance emerges at the recent swing high near $4,765, with a break above exposing the $4,820–$4,830 band where the 200-period exponential moving average reinforces a tougher barrier.
(The technical analysis of this story was written with the help of an AI tool.)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
