Gold trims a part of intraday gains amid bullish USD, hawkish central banks
- Gold attracts some buyers as Trump’s announcement to delay Iran strikes weighs on the USD.
- Geopolitical risks remain in play amid contrasting news surrounding the ongoing US-Iran war.
- Inflation worries fuel hawkish Fed bets, which favor the USD bulls and should cap the bullion.
Gold (XAU/USD) sticks to a positive bias through the first half of the European session on Friday, though it lacks follow-through amid the emergence of fresh US Dollar (USD) buying. The initial market reaction to US President Donald Trump's decision to delay strikes on Iran’s energy infrastructure and extend the deadline to reopen the Strait of Hormuz until April 6 fades amid confusion over peace talks. This, in turn, continues to underpin the safe-haven USD, which, along with expectations of higher interest rates globally, acts as a headwind for the commodity.
Investors now seem convinced that major central banks, including the US Federal Reserve (Fed), will adopt a hawkish stance as escalating geopolitical risks remain supportive of higher energy prices and continue to fuel inflation concerns. In fact, traders now seem to have fully priced out the possibility of any further rate cuts by the US central bank and rapidly increasing bets for a hike by the end of this year. The outlook continues to push US Treasury bond yields higher and favors the USD bulls, which, in turn, is seen keeping a lid on the non-yielding Gold and warrants caution before positioning for further gains.
Meanwhile, contrasting news surrounding the US-Iran conflict has been weighing on investors' sentiment. Speaking at a Cabinet meeting, Trump said that Iran was "begging" to make a deal. Iranian officials, however, have denied holding talks with the US and said that there is no chance of a deal between the two adversaries. Adding to this, the deployment of additional US troops has been fueling speculation of a potential ground operation. This keeps geopolitical risks in play, which could further underpin the Greenback's global reserve currency status and should cap the upside for the Gold price.
The fundamental backdrop, along with the bearish technical setup, makes it prudent to wait for strong follow-through buying before positioning for an extension of the XAU/USD pair's goodish recovery from a four-month low, touched on Monday.
XAU/USD daily chart
Gold seems poised to retest 200-day SMA, near $4,100
The recent breakdown below the rising 100-day Simple Moving Average (SMA) and this week's failure near the said area validate the near-term negative outlook for the precious metal. Momentum remains under pressure, with the Moving Average Convergence Divergence (MACD) indicator holding in negative territory and its line below the signal line, suggesting persistent downside forces despite earlier attempts to stabilize.
Meanwhile, the Relative Strength Index (RSI) recovers from oversold conditions but holds in the low-30s, indicating weak demand and room for sellers to remain in control while rebounds stay capped below the mentioned averages. Hence, the 100-day SMA, around $4,630, might continue to act as an immediate strong barrier, where any recovery would first confront trend-context supply, followed by stronger resistance at the recent congestion area near $4,820. A daily close above that band would be needed to ease the bearish tone and expose the $5,000 region.
On the downside, immediate support aligns with the recent low around $4,380, with a break lower opening the way toward the rising 200-day SMA near $4,120 as the next key support zone. A sustained hold above $4,380 would keep the decline in a corrective mode, but failure there would reinforce the current bearish bias for XAU/USD.
(The technical analysis of this story was written with the help of an AI tool.)
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
