Gold is retreating after hitting three-day highs just below $4,450 early Tuesday, and is flirting with $4,400 as of writing.
Gold awaits Wednesday’s FOMC Minutes
Gold bulls take a breather following two consecutive days of gains, assessing the impact of the truce lapse between the United States (US) and Iran on Oil prices and US Treasury bond yields.
US President Donald Trump said on Monday that he is not interested in renewing the expiring agreement with Iran, per Bloomberg. He continued to reinforce the US naval blockade in the Strait of Hormuz as a key leverage over Iran, while insisting that the US retained control over the vital waterway.
The US-Iran stalemate to end the conflict spurred a renewed buying wave in Oil prices, sending the black gold roughly 3% higher on Monday, and that pushed the longer-duration US Treasury bond yields northward.
Early Tuesday, the US 30-year Treasury bond yields climbed to 5.321%, the highest since mid-2007. Meanwhile, markets are in a risk-off mode amid lingering uncertainty over the Middle East conflict and the US Federal Reserve (Fed) monetary policy outlook.
These concerns seem to help the US Dollar (USD) sustain its recent recovery across the board, leading to a brief pullback in the USD-sensitive bullion.
However, any retreat in Gold could likely be bought amid receding bets on a September Fed rate hike and a bullish daily technical setup.
Strategists at Scotiabank note that the “USD got roughed up a bit last week and Dollar trends continue to soften broadly this morning,” pushing the DXY “just below the base of the August consolidation range and to the lowest point since early June.” They point to “soft US data reports” that are “dampening Fed tightening expectations” and argue that “the 25bps of tightening still priced in by year-end is too much from our perspective.” At the same time, they highlight “clear signs of market angst about US fiscal dynamics,” reflected in “the steepening US yield curve.” In short, Scotiabank concludes that “the retreat in Fed tightening expectations and steeper yield curve are enough to put the USD under pressure in the near-term and drive the DXY back to the 97.5/98.5 range.”
Markets are currently pricing in just a 30% chance that the Fed will raise rates next month, down from roughly 50% seen a week ago, according to the CME Group’s FedWatch Tool.
Looking ahead, Middle East headlines and US housing and industrial data could offer fresh trading impetus to Gold traders, as they position themselves ahead of the Minutes of the Fed’s July policy meeting, due on Wednesday.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,404.12, maintaining a constructive bullish bias as spot holds above a dense floor of moving averages. The 21-day simple moving average (SMA) at $4,205.14 and the 50-day SMA at $4,151.08 sit comfortably below price, while the 100-day SMA at $4,385.05 has been reclaimed as immediate underlying demand. Momentum reinforces the upside tone, with the Relative Strength Index (14) hovering near 64, just shy of overbought territory, hinting that buyers remain in control but may soon face fatigue if gains extend too quickly.
Adding credence to the bullish bias, the 21-day SMA and 50-day SMA Bull Cross, confirmed last week, remains in play.
On the topside, initial resistance is now defined by the 200-day simple moving average at $4,508.81, and a sustained break above this barrier would open the way for a more decisive bullish extension. On the downside, the first line of support aligns with the 100-day SMA at $4,385.05, followed by the 21-day SMA at $4,205.14 and the 50-day SMA at $4,151.08, where deeper pullbacks would be expected to attract dip-buying while the broader daily structure remains positively oriented.
(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.
