Gold Price Holds Above $4,200 as Bearish Bias Persists Amid US-Iran Risks
Gold prices recovered from modest intraday losses and traded near flat during the first half of the European session, although the precious metal remained below its daily peak. Despite ongoing uncertainty surrounding a potential US-Iran peace agreement, improving market sentiment failed to provide sustained support for the US Dollar. This development helped limit downside pressure on gold and offered short-term support to the commodity.
From a technical perspective, gold continues to maintain a bearish near-term outlook while trading below the 200-day Simple Moving Average (SMA). Furthermore, Friday’s rejection near the 23.6% Fibonacci retracement level of the decline from April’s monthly swing high suggests that the recent rebound may still be largely driven by short-covering activity rather than a genuine trend reversal.
Technical indicators continue to favor sellers. The Moving Average Convergence Divergence (MACD) remains in negative territory, with the MACD line trading below its signal line and the histogram staying below zero. Meanwhile, the Relative Strength Index (RSI) remains in the mid-30s, indicating that bearish momentum remains intact despite the recent recovery from multi-month lows.
On the upside, immediate resistance is located near the 23.6% Fibonacci retracement level around $4,229, followed by the 38.2% retracement zone near $4,355. Stronger resistance is seen around the 200-day SMA at $4,450 and the nearby 50% retracement level at $4,456. A break above these levels could open the door toward the 61.8% retracement at $4,558 and the 78.6% retracement near $4,703, potentially paving the way for a retest of the cycle high around $4,887.
On the downside, key support remains at the recent swing low near $4,026. A decisive break below this level could signal the beginning of a deeper corrective decline for XAU/USD.
US-Iran Uncertainty and Fed Expectations Weigh on Gold
Mixed signals surrounding a possible US-Iran peace agreement, combined with growing expectations of a hawkish Federal Reserve, continue to support the US Dollar and may limit gains for the non-yielding yellow metal.
US President Donald Trump stated on Thursday that an agreement with Iran had been reached and that a final document could be signed as early as this weekend. However, optimism quickly faded after Iranian officials denied that any final decision had been made regarding the proposed deal.
Adding to the uncertainty, reports indicated that Iran’s new Supreme Leader, Mojtaba Khamenei, has not yet approved the US-backed peace proposal. Iran’s Foreign Ministry also reportedly stated that several key issues, including access through the Strait of Hormuz and the release of frozen assets, remain unresolved.
Geopolitical tensions remain elevated after Iranian forces reportedly stopped a tanker transiting the strategic waterway without prior coordination. Meanwhile, reports suggested that US forces intercepted and destroyed two Iranian one-way attack drones near the Strait of Hormuz.
These developments have kept geopolitical risk premiums in place and contributed to a moderate rebound in crude oil prices, raising concerns about renewed inflationary pressures. This comes as recent US economic data points to a resurgence in inflation, strengthening the case for higher interest rates for a longer period.
Both the US Consumer Price Index (CPI) and Producer Price Index (PPI) released this week signaled renewed inflationary pressures, reinforcing market expectations that the Federal Reserve could raise borrowing costs again later this year. The outlook has provided additional support for the Greenback while weighing on gold prices.
Nevertheless, traders appear reluctant to place aggressive bearish bets on XAU/USD ahead of further developments in the Middle East. Even so, gold remains on track to post a significant loss for a second consecutive week as investors balance geopolitical risks against expectations of tighter US monetary policy.