Gold (XAU/USD) consolidates on Friday as investors wait for further developments regarding a potential US-Iran peace deal. At the time of writing, XAU/USD is trading around $4,200 after hitting an intraday high of $4,246 earlier in the day.
US President Donald Trump said on Thursday that he had canceled planned military attacks on Iran and said a peace deal could be signed as early as this weekend.
Trump’s announcement boosted market sentiment, helping the zloty to rebound from a nearly seven-month low of $4,023 as the price of the US dollar (USD) and oil fell.
Iran’s Foreign Minister Abbas Araghchi said the memorandum of understanding (MoU) with the United States has “never been closer”, while urging the media not to speculate on its content.
Bullion is looking to extend the previous day’s gains as Tehran is yet to announce a final decision. The good run also appears confined after U.S. inflation data released this week reinforced expectations that the Federal Reserve (Fed) may have to keep interest rates higher for longer. Higher borrowing costs tend to fall on unprofitable assets such as gold.
The Consumer Price Index (CPI) rose to 4.2% y/y in May from 3.8% y/y in April, reaching the highest level since April 2023. The Producer Price Index (PPI) rose 6.5% y/y from 5.7%, the highest pace since November 2022.
Hawkish Fed expectations and lingering doubts about the inevitability of a U.S.-Iran deal are also helping to limit losses in the dollar, leaving the precious metal on track for a second straight weekly loss.
The US Dollar Index (DXY), which measures the dollar’s value against a basket of six major currencies, is steady around 99.78, maintaining moderate gains on the day.
On the data side, the University of Michigan’s flash consumer sentiment index improved to 48.9 in June from 44.8 in May, beating market expectations of 46. Meanwhile, one-year and five-year inflation expectations fell to 4.6% and 3.4%, respectively, from 4.8% and 3.9%.
Technical Analysis: Bears remain in control as RSI signals tender momentum
XAU/USD remains in a short-term bearish bias as the price holds below the 20-day elementary moving average (SMA) of the Bollinger Bands at around $4,425, making the recent rebound look corrective within the broader decline.
On the daily chart, the dynamics are tender. The Relative Strength Index (RSI) is trading around 35, showing tender upside momentum, while an elevated Average Directional Index (ADX) near 35 suggests that the prevailing downtrend remains technically sturdy even as volatility reduces within the Bollinger Envelope.
On the other hand, initial support appears near the lower Bollinger Band around $4,149, ahead of more significant horizontal demand at $4,000, where buyers are expected to defend a deeper pullback.
On the upper end, the rebound would first encounter resistance at the Middle Bollinger Band/20-day SMA near $4,425, with another barrier at the Upper Bollinger Band near $4,701, which together define a key zone that bulls would need to reclaim to ease the current bearish tone.
(The technical analysis for this story was written with the assist 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 operate 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 safe and sound 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 favor the precious metal.
The price may vary 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 sturdy dollar tends to keep the gold price in check, while a weaker dollar will likely cause gold prices to rise.
