Gold scales higher as US-Iran peace hopes and easing inflationary concerns undermine USD

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Gold (XAU/USD) attracts some dip-buyers at the start of a new week and rallies over $50 from the Asian session low, around the $4,672 region.

Gold regains positive traction as hopes for US-Iran peace talks exert some pressure on the USD.
Softer Oil prices ease inflation fears and hawkish Fed bets, further benefiting the precious metal.
The recent range-bound price action warrants caution for bulls ahead of the key FOMC meeting.

Gold (XAU/USD) attracts some dip-buyers at the start of a new week and rallies over $50 from the Asian session low, around the $4,672 region. Reports suggest that Iran gave the ‌US a new proposal on reopening the Strait of Hormuz and ending the war, with nuclear negotiations postponed for a ‌later stage. This revives hopes for US-Iran peace talks and undermines the US Dollar's (USD) reserve currency status, which, in turn, acts as a tailwind for the commodity.

The optimism exerts some downward pressure on Crude Oil prices and eases inflationary concerns, leaving the door open for at least one 25-basis-point (bps) interest rate cut by the US Federal Reserve (Fed) in 2026. This turns out to be another factor weighing on the Greenback and benefiting the non-yielding Gold. However, a combination of factors might hold back traders from placing aggressive bullish bets on the XAU/USD pair and keep a lid on any meaningful appreciating move.

Traffic through the Strait of Hormuz remains largely blocked due to Iran's restrictions on movement and the US naval blockade of Iranian ports. Furthermore, Israeli Prime Minister Benjamin Netanyahu said he has ordered the military to vigorously attack Hezbollah targets in Lebanon. This keeps geopolitical risks in play, which should limit losses for Crude Oil prices and the safe-haven USD, warranting some caution before positioning for any further move up for the XAU/USD pair.

Furthermore, traders might also opt to move to the sidelines ahead of the crucial two-day FOMC policy meeting, starting on Tuesday. Investors will look for more cues about the Fed's policy path amid still sticky inflation and resilient US economic activity. The outlook, in turn, will play a key role in driving the USD demand. Apart from this, developments surrounding the US-Iran saga should contribute to infusing volatility and providing some meaningful impetus to the XAU/USD pair.

Meanwhile, Gold premiums in India climbed to their highest in over two-and-a-half months last week due to limited supplies. Moreover, bullion traded at premiums of $9 to $12 an ounce in China, up from the previous week's premium of $3 to $6 amid some renewed physical demand and fresh buying interest, further favoring bulls. This, in turn, backs the case for a further upside for the XAU/USD pair and suggests that intraday slides are more likely to be bought into and remain limited.

XAU/USD daily chart

Gold remains confined in the monthly range amid a mixed technical setup

From a technical perspective, the precious metal has been consolidating in a familiar range since the beginning of this month. This comes on top of a solid rebound from the very important 200-day Simple Moving Average (SMA), tested in March, and suggests the broader uptrend remains intact, even as momentum cools. In fact, the Relative Strength Index (RSI) is hovering near a neutral 47, and the Moving Average Convergence Divergence (MACD) indicator is showing only modest positive readings. This hints at waning upside pressure rather than a decisive reversal, suggesting a period of sideways-to-soft consolidation before a clearer directional move emerges.

Meanwhile, weakness back below the $4,700 mark might continue to find decent support and attract fresh buyers near the lower boundary of the month-to-date range, around the $4,650-$4,645 region. A convincing break below might prompt aggressive technical selling and pave the way for deeper losses. On the upside, the $4,750 area could act as an immediate hurdle ahead of the $4,800 mark and the $4,860-$4,865 region. The latter represents the top end of the trading range, which, if cleared decisively, will be seen as a fresh trigger for bullish traders and set the stage for a further appreciating move beyond the $5,000 psychological mark.

Gold FAQs

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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.