Gold steadily climbs closer to $5,200 as Middle East tensions underpin safe-haven demand
- Gold attracts some dip-buyers on Thursday as rising geopolitical tensions underpin safe-haven demand.
- The lack of follow-through USD buying further supports the commodity, though the upside seems capped.
- Inflation concerns dim Fed rate cuts hopes and lift US bond yields, supporting the USD and capping gains.
Gold (XAU/USD) climbs to the top end of its daily trading range during the first half of the European session on Thursday, though it remains below the $5,200 mark. A further escalation of the military conflict between Israel, US forces, and Iran keeps geopolitical risks in play, which, in turn, assists the safe-haven precious metal to attract some buyers near the $5,125 area. In fact, Iran’s Islamic Revolutionary Guard Corps (IRGC) said that it launched a joint operation with Lebanon's Hezbollah against targets in Israel, Jordan, and Saudi Arabia. Furthermore, the lack of follow-through US Dollar (USD) buying turns out to be another factor lending some support to the commodity.
Meanwhile, reports that two oil tankers were attacked in the northern Persian Gulf near Iraq and Kuwait add to worries about supply disruptions from the Middle East. The latest development triggers a rally of over 6% in Crude Oil prices and threatens the inflation outlook. The International Monetary Fund (IMF) Managing Director Kristalina Georgieva warned on Monday that a sustained 10% rise in Oil prices for a year would push global inflation by 40 basis points (bps). This might force the US Fed to delay cutting interest rates and lead to a further rise in the US Treasury bond yields, which should act as a tailwind for the USD and keep a lid on any further appreciating move for the Gold price.
Traders now look forward to the release of the usual US Weekly Initial Jobless Claims, due later today, for some impetus ahead of the US Personal Consumption Expenditures (PCE) Price Index on Friday. The focus, however, will remain on developments surrounding the US-Israel-Iran war and Oil price dynamics, which would influence the central banks' policy outlook. Apart from this, the broader risk sentiment should contribute to infusing some volatility around the Gold price.
XAU/USD 4-hour chart
Gold needs to find acceptance above $5,200 to back the case for further gains
The XAU/USD pair holds above the upward-sloping 200-period Simple Moving Average (SMA) on the 4-hour chart, around $5,083, keeping the broader uptrend intact within the ascending channel. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram has eased from recent highs but remains in positive territory, suggesting momentum is cooling rather than reversing. Moreover, the Relative Strength Index (RSI) hovers just below 50, aligning with a modest upside tilt while signaling a lack of strong directional conviction.
Initial support emerges at the channel floor near $5,116, aligned just above the 200-period SMA, and a break below this area would expose deeper downside toward the $5,080 region. On the topside, immediate resistance stands at $5,200, with a sustained move above this barrier opening the way toward the channel resistance near $5,570. As long as the price holds above $5,116, dips are likely to attract buyers, while rejection below $5,200 would keep XAU/USD confined to a consolidative phase within the broader bullish channel.
(The technical analysis of this story was written with the help of an AI tool.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.