Gold extends gains near two-week highs amid optimism over US-Iran war
- Gold extends gains, trades near two-week highs on hopes of US-Iran war de-escalation.
- Softer US Dollar and lower Oil prices support XAU/USD as risk sentiment improves.
- XAU/USD breaks above the 50-period SMA on the 4-hour chart, with the 100-period SMA coming into focus.
Gold (XAU/USD) trades with a mild upside bias on Wednesday, building on the previous day's solid gains as optimism grows that the US-Israel war with Iran could end soon.
At the time of writing, XAU/USD is trading around $4,725 after touching $4,763 earlier in the European session, its highest level in nearly two weeks.
US President Donald Trump, speaking from the Oval Office, told reporters that the United States “will be leaving Iran very soon,” adding that military action could end within “two or three weeks.” He said, “We’ll leave whether we have a deal or not.”
Meanwhile, Iranian President Masoud Pezeshkian said on Tuesday that his country has the “necessary will” to end the ongoing conflict, but is seeking guarantees to ensure the war does not happen again.
Risk sentiment improved across financial markets following these developments, pushing Oil prices, lowering the US Dollar (USD) from recent highs, and lifting Bullion.
However, tensions around the Strait of Hormuz persist, and Oil prices remain elevated compared to pre-conflict levels, keeping both inflation concerns and risks to economic growth in focus.
This, in turn, supports expectations that central banks, particularly the Federal Reserve (Fed), may keep interest rates higher for longer, raising the opportunity cost of holding non-yielding assets like Gold and could limit strong follow-through buying.
According to the CME FedWatch Tool, markets expect the Fed to keep interest rates steady at 3.50%-3.75% through 2026. If geopolitical tensions ease further and lead to a meaningful decline in Oil prices, expectations for Fed easing could return.
Fresh US economic data showed the ADP Employment Change rose by 62K in March, beating expectations of 40K but easing from the previous reading of 66K (revised from 63K). Meanwhile, Retail Sales increased by 0.6% in February, above the forecast of 0.5% and rebounding from a revised -0.1% decline in January (previously -0.2%).
Looking ahead, speeches from Fed officials, including St.Louis Fed President Alberto Musalem and Fed Governor Michael Barr, will also be closely watched for cues on the monetary policy outlook. Attention will also be on Donald Trump, who is scheduled to address the nation at 01:00 GMT on Thursday to provide an important update on Iran.
Technical analysis: XAU/USD strengthens after triangle breakout
From a technical perspective, XAU/USD is gaining traction after climbing above the 50-period Simple Moving Average (SMA) on the 4-hour chart and breaking out of an ascending triangle pattern. Prices are now testing the 100-period SMA near $4,746, which is acting as immediate resistance.
Momentum indicators support the upside: the Relative Strength Index (RSI) is rising toward the overbought zone at 69, while the Moving Average Convergence Divergence (MACD) line remains above its signal and above the zero line with a positive histogram, suggesting firm buying pressure.
On the upside, a move above the 100-period SMA would expose the next resistance at $4,850, followed by the $5,000 psychological level. On the downside, the upper boundary of the ascending triangle near $4,600 is providing immediate support, ahead of the 50-period SMA at $4,496.
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.