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Gold Faces Pullback Risk Amid Oversold Conditions and Gulf War Tensions
Gold prices extended their downward trend on Tuesday morning, slipping below the $4,400 level as geopolitical tensions in the Middle East persist. The ongoing conflict continues despite efforts by Donald Trump to extend an ultimatum for Iran to reopen the Strait of Hormuz within 48 hours.
In the short term, gold has shifted into a bearish bias after breaking below key technical indicators, including the 21-day Simple Moving Average (SMA) near $5,000 and the 50-day SMA around $4,970. This breakdown confirms a loss of previous support levels and signals a transition from a bullish trend into a corrective phase. Prices are now approaching the 100-day SMA near $4,610. Meanwhile, the 14-day Relative Strength Index (RSI) stands at 26, indicating oversold conditions, though the consistent decline from above 50 highlights strong selling pressure rather than a completed downtrend.
Initial resistance is seen near $4,650—formerly a support level—while the 21-day SMA around $5,000 reinforces a broader supply zone during potential rebounds. A daily close above the 50-day SMA at $4,970 is needed to ease immediate downside pressure and reopen the path toward the $5,100 level. On the downside, immediate support lies at the psychological level of $4,300, followed by the rising 200-day SMA near $4,100, which represents a stronger medium-term floor. A decisive break below $4,300 could extend the bearish phase toward the 200-day average and deepen the correction within the long-term uptrend.
Market sentiment remains highly sensitive to geopolitical developments. Trump cited “productive talks” with Iran as a reason for a potential five-day delay in military action. However, Iran’s Foreign Ministry denied any negotiations with the United States over the past 24 days of conflict.
This conflicting narrative has fueled volatility across financial markets, particularly in gold, silver, and WTI crude oil. Gold recently rebounded from a four-month low of $4,099 after Trump’s delay offered temporary relief to buyers. Prior to that, the metal had plunged nearly 9% amid escalating tensions, including threats targeting civilian and energy infrastructure linked to the Strait of Hormuz dispute.
Despite the temporary relief, markets appear to interpret Trump’s softened stance as a recurring “TACO” (Trump Always Chickens Out) moment, prompting a return of risk-off sentiment and renewed bearish pressure on gold. At the same time, oil prices are recovering, with expectations of prolonged elevated energy costs.
This outlook has revived inflation concerns and increased speculation that the Federal Reserve may consider raising interest rates later this year. Rising rate expectations typically weigh on non-yielding assets like gold, adding further downside pressure.
Additional bearish momentum comes from reports of renewed Israeli strikes in Tehran. The Israel Defense Forces (IDF) confirmed ongoing operations in line with government directives, further intensifying geopolitical uncertainty.
Looking ahead, gold sellers may face intermittent pullbacks due to deeply oversold conditions, with RSI levels remaining well below 30. However, price action will likely continue to be driven primarily by developments in the Middle East conflict, making geopolitical headlines the key catalyst for gold market direction.