Gold struggles to build on intraday gains, remains below $5,200 amid positive risk tone
- Gold attracts some safe-haven flows on Tuesday amid persistent geopolitical uncertainties.
- Retreating US bond yields undermine the USD and lend support, though reduced Fed rate cut bets cap gains.
- The recent range-bound price action warrants some caution before placing fresh directional bets.
Gold (XAU/USD) sticks to modest intraday gains heading into the European session on Tuesday, though it lacks follow-through buying and remains below the $5,200 mark. Geopolitical risks remain in play amid a further escalation of tensions in the Middle East, which, in turn, assists the safe-haven precious metal to build on the previous day's bounce from the vicinity of the $5,000 psychological mark. In fact, Iranian officials dismissed US President Donald Trump’s remarks that the Middle East conflict will end soon as nonsense and warned that regional security would either exist for everyone or for no one. Moreover, Iran’s Islamic Revolutionary Guard Corps (IRGC) said that Tehran, not Washington, will determine when the war ends.
Meanwhile, Crude Oil prices regain positive traction following the previous day's dramatic turnaround from the highest level since June 2022 amid worries about potential disruptions in supplies due to the closure of the Strait of Hormuz. Investors remain worried that a sustained increase in energy prices would drive up inflation and prompt the US Federal Reserve (Fed) to delay rate cuts. However, retreating US Treasury bond yields drag the US Dollar (USD) further away from a three-month peak, touched the previous day, and further benefits the non-yielding Gold.
However, a positive risk tone and the lack of follow-through buying warrant caution for the XAU/USD bulls. Traders now look forward to the US inflation figures for a fresh impetus. The US Consumer Price Index (CPI) is due for release on Wednesday and will be followed by the US Personal Consumption Expenditure (PCE) Price Index on Friday. The crucial data will play a key role in influencing Fed rate-cut expectations and drive the USD demand, which, in turn, should provide a fresh impetus to the Gold. The focus, however, remains on developments surrounding the US-Israel war with Iran.
XAU/USD 4-hour chart
Gold bulls await breakout through trading range hurdle near $5,200
From a technical perspective, the XAU/USD pair has been oscillating in a range over the past week or so and finding some support ahead of the rising 200-period Exponential Moving Average (EMA) on the 4-hour chart. The latter is pegged at around $5,010, which coincides with the lower end of the trading range and should act as a key pivotal point for short-term traders.
The Moving Average Convergence Divergence (MACD) line has turned positive and extends above its signal line, with a growing positive histogram that suggests strengthening upside momentum after the recent consolidation. The Relative Strength Index hovers just above 50, reinforcing the idea of emerging bullish pressure rather than overextended conditions.
Moreover, the near-term bias seems tilted mildly bullish as the Gold price holds above the $5,010 confluence, keeping the broader uptrend structure intact. Initial support appears at the recent swing area near $5,140, with a deeper floor at the 200-period EMA on the 4-hour chart.
On the topside, immediate resistance comes in around the late-swing highs near $5,190, where prior rejection capped advances, followed by a higher barrier at $5,230 if buyers extend the move. A sustained hold above $5,140 would keep the bullish bias in play, while a break below $5,010 would weaken the upward outlook and shift focus back toward a corrective phase.
(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.
