Gold (XAU/USD) is based on an overnight moderate rebound from near $4,500 or a fresh monthly low and is gaining some positive strength during Thursday’s Asian session. The US dollar (USD) is entering a phase of upward consolidation after Wednesday’s relatively hawkish rise inspired by the Federal Reserve (Fed) to its highest level in two and a half weeks and is seen as a key factor influencing the tailwind for this commodity.
As widely expected, the US central bank left the main interest rate unchanged at 3.50%-3.75%. Notably, this decision was met with the most dissent since 1992, with three decision-makers voting against the accommodative tone of the policy statement. At a post-meeting press conference, outgoing Fed Chairman Jerome Powell clarified that the debate was about neutral tone, not the need to raise interest rates. However, traders have significantly reduced bets on further Fed easing in 2026 and are currently pricing in a more than 10% chance of a rate hike by the end of the year.
The decision comes as war-induced increases in energy prices stoke inflation fears amid stalled U.S.-Iran peace talks, supporting dollar bulls. Referring to the latest developments related to the crisis in the Middle East, US President Donald Trump rejected Iran’s recent proposal to end the two-month conflict and repeated that there will be no peace agreement with the Islamic Republic unless it agrees to abandon its nuclear program. Trump added that the naval blockade of Iranian ports deepens ongoing disruptions in energy supplies through the Strait of Hormuz.
This, in turn, could further strengthen the dollar’s reserve currency status and keep the price of gold from rising significantly. Nevertheless, the XAU/USD pair appears to have snapped its three-day losing streak and is currently trading near the $4,580 region, up 0.75% on the day. Traders are now eagerly awaiting the US economic report, which includes the release of the first quarter GDP report and the Personal Consumer Expenditures (PCE) price index. This, together with policy updates from the Bank of England and the European Central Bank, should cause some volatility.
XAU/USD 4-hour chart
Gold will likely attract recent sellers at higher levels amid a bearish technical setup
In the context of the recent failure to find acceptance above the 200-period plain moving average (SMA) on the 4-hour chart, an overnight break below the 38.2% Fibonacci retracement level of the March and April gains favors XAU/USD bears.
Moreover, momentum indicators remain volatile, with the Relative Strength Index (RSI) hovering around 38 and the Moving Average Divergence (MACD) line still in negative territory. This in turn suggests that economic recovery efforts may prove arduous while the gold price remains constrained below these broad levels.
On the other hand, immediate support is seen at the 50.0% retracement area around $4,494.59, ahead of deeper Fibonacci lows at $4,401.36 and $4,268.64, with the latter levels marking a wider corrective cushion should selling pressure resume.
(The technical analysis for this story was written with the support of an AI tool.)
Gold FAQs
Gold has played a key role in human history as it has been widely used as a store of value and a medium of exchange. Nowadays, beyond its luster and exploit in jewelry, the precious metal is widely viewed as a safe-haven asset, meaning it is considered a good investment in turbulent times. Gold is also widely seen as a hedge against inflation and currency depreciation because it is not tied to any particular issuer or government.
Central banks are the largest holders of gold. To support their currencies in turbulent times, central banks typically diversify their reserves and purchase gold to improve the perceived strength of the economy and currency. High gold reserves may provide a source of confidence in the country’s solvency. According to data from the World Gold Council, central banks added 1,136 tons of gold to their reserves in 2022, worth about $70 billion. This is the highest annual purchase since registration began. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US dollar and US treasury bonds, which are both major reserve assets and secure haven assets. When the dollar depreciates, gold tends to rise, allowing investors and central banks to diversify their holdings in turbulent times. Gold is also inversely correlated with risky assets. A rally in the stock market tends to weaken the price of gold, while sell-offs in riskier markets support the precious metal.
The price may change due to many factors. Geopolitical instability or fear of a deep recession can quickly cause gold prices to rise due to its safe-haven status. Gold, as a non-yielding asset, tends to rise in lower interest rates, while the higher cost of money tends to weigh on the yellow metal. Still, most of the movements depend on the behavior of the US dollar (USD) when the asset is priced in dollars (XAU/USD). A powerful dollar tends to keep the gold price in check, while a weaker dollar will likely cause gold prices to rise.
