Gold starts week under pressure as US-Iran stalemate and strong Dollar cap XAU/USD

• Gold starts the week on the back foot as slow US-Iran talks keep buyers cautious.
• The US Dollar remains the preferred safe-haven asset, weighing on XAU/USD despite elevated geopolitical risks.
• Technically, XAU/USD remains bearish, while weak momentum indicators underpin the downside bias.

Gold (XAU/USD) kicks off the week with a negative bias as slow progress toward a US-Iran ceasefire extension deal and fresh attacks in the Middle East keep buyers cautious. At the time of writing, XAU/USD is trading around $4,500 after hitting a two-week high near $4,595 on Friday.

US Central Command (CENTCOM) said it carried out “self-defense strikes” on Iranian radar and drone facilities over the weekend. Iran’s Revolutionary Guard said on Monday they had targeted an air base used by US forces in retaliation for an attack on southern Iran. At the same time, Israel has expanded military operations against Hezbollah in Lebanon.

Iran’s Foreign Ministry spokesperson Esmaeil Baghaei said “lack of trust, constant changes in the US position and Israeli actions in Lebanon” are delaying the diplomatic process. However, he added that message exchanges between Washington and Tehran are still ongoing.

Negotiations between Washington and Tehran continue to face hurdles as both sides remain far apart on major issues such as Iran’s nuclear program, sanctions relief and the future status of the Strait of Hormuz.

Despite heightened geopolitical tensions, XAU/USD is down more than 15% since the war began and is nearly 20% below its all-time high near $5,600, set in late January. The US Dollar (USD) has emerged as the preferred safe-haven asset at the expense of Gold.

A stronger Greenback makes Gold more expensive for foreign buyers. Another headwind for the precious metal comes from the sharp rise in Crude Oil prices.

Higher energy costs are adding to inflationary pressure and reinforcing expectations that major central banks, including the Federal Reserve (Fed), may need to keep monetary policy tighter for longer.

While Gold is traditionally seen as a hedge against inflation, for now markets are paying more attention to where interest rates are headed. A higher interest rate environment raises the opportunity cost of holding non-yielding assets.

According to the CME FedWatch Tool, markets are pricing in a 40% chance of a 25-basis-point (bps) rate hike at the December meeting. Resilient US economic data has also dimmed hopes for near-term interest rate cuts.

Against this backdrop, any recovery in Gold is likely to attract selling interest unless Washington and Tehran reach a lasting agreement that drives Oil prices lower and helps ease inflation concerns.

Looking ahead, traders await the US Nonfarm Payrolls (NFP) report due on Friday for fresh clues on the Fed’s interest-rate path. Before that, attention on Monday will turn to the release of the US ISM Manufacturing Purchasing Managers Index (PMI) data.

Technical analysis: XAU/USD stays bearish below $4,600 resistance

On the daily chart, XAU/USD holds a modest bearish bias, with price retreating below the nearby horizontal resistance at $4,600 while remaining capped well beneath the 100-day Simple Moving Average (SMA) at roughly $4,802.

The 200-day SMA at about $4,411 sits below spot and still underpins the broader uptrend, but the Relative Strength Index (RSI) near 43 and a modest Average Directional Index (ADX) around 24 suggest soft downside pressure in a relatively weak directional environment.

On the topside, initial resistance is seen at the $4,600 horizontal barrier, with a sustained break needed to expose the 100-day SMA near $4,802 as the next bullish objective.

On the downside, immediate support is provided by the 200-day SMA around $4,411, ahead of more substantial structural demand at the $4,100 horizontal level. A daily close below this latter floor would likely reinforce the prevailing bearish tone.

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