Gold clings to previous day’s recovery around $3,945 in the Asian trade on Tuesday, as hopes of a deal between the United States (US) and Iran have kept oil prices under pressure. Still, the Gold price is close to its yearly low of $3,870.23 posted on Friday.
As of writing, the WTI Oil price holds onto previous day’s losses near $95.00. Oil prices have retreated significantly from its five-month high of $104.03 posted on Friday.
Theoretically, a period of correction in oil prices anchors inflation expectations. Such a scenario diminishes fears of prolonged higher interest rates by central banks. This bodes well for non-yielding assets, such as Gold.
What led to improvement in US-Iran deal hopes?
Remarks from several United States (US) officials have indicated that President Donald Trump is more interested in making a deal with Iran, and not resuming military action.
Over the weekend, US Secretary of State Marco Rubio said that Washington hasn’t made any decision to renews strikes on Tehran and that President Donald Trump prefers a diplomatic resolution.
On Monday, US Vice President JD Vance told that he just spoke to President Trump about talks with Iran and said “the president and I both feel pretty good about the prospects for potentially coming to a negotiated settlement,” The Associated Press (AP) reported.
Meanwhile, Iran’s Islamic Revolutionary Guard Corps (IRGC) has reported that that two US MQM-170 drones were intercepted and brought down south of Qeshm Island in the Strait of Hormuz, while the 55th US MQ-9 drone east of the Hormuz Strait was destroyed. However, there seems to be no meaningful impact of the attack on oil prices.
What are next key triggers for Gold?
This week, key triggers for Gold will be US Midterm elections and several employment-related economic indicators, notably the Nonfarm Payrolls (NFP) data for September.
ING’s Chris Turner flags the US midterm elections as the key event risk for FX this week, noting that betting markets now give the Democrats a “70-72% chance of taking both the House and the Senate.” He argues that a Democrat clean sweep would likely “lead to gridlock on the debt ceiling, a prolonged government shutdown next year and could encourage President Trump to pursue an even more activist foreign policy agenda.”
Later in the day, investors will focus on the US JOLTS Job Openings data for September, which will be published at 15:00 GMT. According to estimates, US employers posted 7.13 million fresh jobs, slightly higher than 7.097 million in August.
Gold Technical Analysis
In the daily chart, XAU/USD trades at $3,935.94, keeping a bearish near-term bias as price holds below the 20-period Exponential Moving Average (EMA) at $4,063.86. The metal remains capped by this short-term trend indicator, suggesting upside attempts are vulnerable while sellers stay in control.
The Relative Strength Index (14) at 36.24 sits just above oversold territory, hinting at weak but persistent downside pressure rather than a decisive exhaustion of the move.
On the topside, initial resistance is located at the 20-period EMA at $4,063.86, and a daily close above this barrier would be needed to ease immediate bearish pressure and open the way for a more sustained recovery. Looking down, the yearly low at $3,870.23 is the critical support level; a decisive break below the same would expose Gold price to $3,800, followed by $3,700.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
