Gold pares intraday losses; bearish bias remains on hawkish central banks, firmer USD
- Gold extends the overnight pullback from the 100-day SMA amid hawkish central bank expectations.
- Geopolitical risks fuel inflation fears and Fed rate hike bets, lending some support to the USD.
- The technical setup favors bears and warrants some caution before positioning for any recovery.
Gold (XAU/USD) trims a part of its intraday losses to the $4,415 area and, for now, seems to have stalled the previous day’s rejection slide from the 100-day Simple Moving Average (SMA). Any meaningful recovery, however, seems elusive in the wake of hawkish central banks and a bullish US Dollar (USD), which tends to undermine the non-yielding yellow metal. This, in turn, warrants some caution before positioning for an extension of this week’s goodish recovery from a technically significant 200-day SMA support near the $4,100 mark, or a four-month low.
Despite US President Donald Trump’s ceasefire rhetoric, Iran publicly rejected claims of ongoing negotiations and said that there is no chance of a deal between the two adversaries. Moreover, Iran turned down a 15-point ceasefire proposal from the US and has reportedly set sweeping demands to wind down the widening Middle East conflict. Apart from this, the deployment of additional US troops in the region raises to the risk of further escalation of the conflict, which continues to underpin the USD’s global reserve currency status and, in turn, is seen weighing on the Gold price.
Meanwhile, energy infrastructure in Iran remains under pressure. Adding to this, the effective closure of the Strait of Hormuz acts as a tailwind for Crude Oil prices, fueling inflationary concerns and bolstering bets for a hawkish stance from major central banks, including the US Federal Reserve (Fed). In fact, traders have nearly priced out the possibility of any further rate cuts by the Fed and are rapidly increasing bets for a hike by the end of this year. This triggers a fresh leg up in US Treasury bond yields, which further supports the USD and contributes to driving flows away from the Gold.
The XAU/USD pair remains highly sensitive to geopolitical headlines, and volatility is expected to remain elevated amid speculation of a potential US ground operation to seize Iran’s key oil export hub at Kharg Island.
XAU/USD daily chart
Gold seems vulnerable while below the $4,600 confluence hurdle
From a technical perspective, the near-term bias is mildly bearish as the XAU/USD pair holds below the 100-day SMA, which capped the overnight move up, suggesting a corrective phase within a broader downtrend. Adding to this, the Moving Average Convergence Divergence (MACD) indicator stays in negative territory with the line below its signal line, reinforcing persistent downside momentum. Furthermore, the Relative Strength Index (RSI) hovers in the low-30s after dipping below 30, indicating that bearish pressure dominates but short-term oversold conditions could slow the decline.
Meanwhile, the 100-day SMA coincides with the 38.2% Fibonacci retracement level of the fall from the monthly swing high, reinforcing a key barrier. A daily close above that area would open the way toward the 50.0% retracement level at $4,770, where sellers could reappear. On the downside, initial support aligns near the 23.6% Fibo. retracement level at $4,422, ahead of the recent swing low at $4,407. A break below this band would expose the $4,300 region, while only a recovery back above $4,614 would start to erode the current bearish tone.
