Gold is challenging the $4,700 level on renewed downside in Asia on Thursday, wiping out the previous rebound.
Gold remains a ‘sell on rise’ trade
Gold is facing headwinds once again as the US Dollar (USD) holds onto its recent recovery gains amid a stand-off between the United States (US) and Iran on peace talks and the Strait of Hormuz gambit.
With no signs of negotiations restarting, the Iranian seizure of two ships in the Strait and the continued US naval blockade of the former’s ports have left investors on edge, who prefer to seek safety in the US dollar, the world’s reserve currency, boding ill for the USD-denominated yellow metal.
Despite the latest leg down, the bullion remains confined within a familiar range, with the downside cushioned by the revival of hopes that the US Federal Reserve (Fed) will deliver at least one interest rate hike by the end of this year.
Gold buyers also remain hopeful for an extension of the truce between Israel and Lebanon as both sides are set to hold a new round of talks in Washington on Thursday.
There are reports that Beirut plans to request a one-month extension of the ceasefire due to expire in days.
In the day ahead, the broader market sentiment and updates on the Middle East conflict will lead the way for Gold, while traders brace for the preliminary global business PMI data.
The data will be closely scrutinized as it will provide more insights into the economic impact of the Middle East war, especially from the US, as it could significantly impact the market expectations for the Fed rate outlook.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,700.60. The metal is holding just above the 21-day simple moving average (SMA) near $4,693, but remains capped beneath the 100-day SMA at $4,736 and the descending trendline resistance clustered around $4,737, preserving a mildly bearish, corrective bias. The broader structure shows price still above the 200-day SMA at $4,244 and a pair of rising support trend lines, yet the Relative Strength Index (14) hovering around 46 hints at waning upside momentum as rallies struggle against the overhead confluence.
On the topside, immediate resistance is located at the 100-day SMA around $4,736, closely followed by the descending trendline near $4,775; a sustained break above this band would be needed to ease the current cap and open the way toward the 50-day SMA near $4,875. On the downside, initial support aligns with the 21-day SMA in the $4,690–4,700 region, ahead of the higher rising trendline support around $4,589; a loss of that area could expose the lower ascending trendline near $4,383, with the 200-day SMA at roughly $4,244 acting as a more substantial medium-term floor.
(The technical analysis of this story was written with the help of an AI tool.)
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.