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Gold Faces Downside Pressure Amid Hormuz Tensions and Rising Inflation Fears
Gold prices staged a modest rebound from a one-month low of $4,501 early Tuesday, often described as a dead cat bounce. However, the recovery appears fragile as sellers are likely to re-enter the market. Persistent demand for the US Dollar as a safe-haven asset, combined with renewed geopolitical tensions around the Strait of Hormuz, continues to weigh on the precious metal.
From a technical perspective, XAU/USD is trading near $4,540.20 on the daily chart, maintaining a short-term bearish bias. The price remains capped below the 21-day Simple Moving Average (SMA) at $4,701.91, along with a stronger resistance cluster formed by the 100-day SMA at $4,766.49 and the 50-day SMA at $4,808.32. Although gold is still holding above the 200-day SMA at $4,293.14 and an ascending trendline support near $4,382.60, downside risks persist. A descending trendline resistance around $4,607.28 and a weak Relative Strength Index (RSI 14) reading of 39.12 suggest that any upward moves may attract selling pressure as long as prices remain below key resistance levels.
On the upside, immediate resistance is seen near $4,607.28, followed by the 21-day SMA at $4,701.91. A sustained breakout above this zone could open the door toward the 100-day SMA at $4,766.49 and eventually the 50-day SMA at $4,808.32. On the downside, initial support lies near current price levels, with stronger support located around the broken uptrend zone at $4,382.60, followed by the 200-day SMA at $4,293.14. This area is expected to act as a key defense zone for buyers aiming to preserve the broader bullish trend.
Fundamental Outlook
Market sentiment remains risk-averse, favoring the US Dollar and limiting gold’s upside potential. Escalating tensions between the United States and Iran, particularly around the Strait of Hormuz, have reignited inflation concerns following a recent surge in oil prices.
These fears intensified after reports that US forces engaged Iranian units and sank several small vessels targeting civilian ships while attempting to reopen the strait. The United Arab Emirates (UAE), a key US ally, also reported intercepting multiple missiles and drones allegedly launched by Iran.
While Iran has neither fully confirmed nor denied these incidents, its Foreign Minister, Abbas Araghchi, warned that both the US and UAE should avoid being drawn deeper into conflict. Meanwhile, Iranian media cited military sources claiming that US forces attacked two civilian vessels carrying goods to Iran, though these ships were reportedly not linked to the Islamic Revolutionary Guard Corps (IRGC).
If tensions in the Strait of Hormuz continue to escalate, gold could face sustained downward pressure due to a combination of stronger US Dollar demand and rising expectations of tighter monetary policy. Inflation concerns are likely to reinforce hawkish expectations for the US Federal Reserve, which typically acts as a headwind for non-yielding assets like gold.
As long as geopolitical risks persist without signs of de-escalation, the US Dollar is expected to remain the preferred safe-haven asset, keeping gold vulnerable to further declines. Market participants are closely watching whether the fragile ceasefire in place since early April will hold or collapse amid rising tensions in the region.