Gold is recovering from bulky losses suffered on Thursday, maintaining its range near $4,050 early Friday. Despite the recent pullback, gold remains on track to post its first weekly gain in three years.

The zloty may expect further correction

Gold saw a piercing corrective decline of 2% on Thursday after hitting two-week highs of $4,166 earlier in the week.

The piercing decline in gold prices can be attributed to heightened concerns about inflation and the resulting enhance in hawkish expectations about the prospect of a U.S. Federal Reserve (Fed) interest rate hike in the wake of the escalation of the U.S.-Iran war in the Middle East, which has pushed oil prices back to six-week highs or toward $100 a barrel.

Fear that two of the world’s busiest shipping corridors could be at risk in the same month is driving black gold.

According to TD Securities, the broader macro backdrop remains unfavorable for sustained growth in bullion positions, with the bank arguing that “there are no fundamental reasons to believe that U.S. exchange rate and currency conditions will be supportive of increasing long gold exposures in the near term.” The company cautions that geopolitical tensions also influence these dynamics, noting that “it is likely that oil price increases driven by the war in the Middle East will continue to increase the likelihood of the Fed raising interest rates.”

Meanwhile, the US military carried out attacks on Iran for the 13th consecutive night, targeting drone facilities, coastal surveillance sites, etc.

This came after US President Donald Trump said he was close to deciding to launch a “massive attack” on Iran on a scale greater than the strikes that have taken place over the past five months.

Trump also previously warned of “serious military punishment” against Iran and the Houthis after Iran-backed Yemeni militias attacked two Saudi oil tankers in the Red Sea.

Attention now turns to preliminary global PMI data due for release later in the day, which could highlight the impact of the war on manufacturing and services sectors around the world.

Any disappointment in the PMI readings could revive the appeal of the US dollar (USD) as a haven, further negatively impacting gold.

Gold traders could also resort to profit-taking and position adjustments following the recent economic recovery and ahead of the Fed’s July interest rate decision, which is due next Wednesday.

However, if trade tensions escalate, the dollar could weaken further, limiting the corrective decline in the value of gold.

The United States announced Thursday that it is imposing up-to-date tariffs on about 60 trading partners, ranging from 10% to 12.5%, as a short-lived 10% tax on foreign goods introduced earlier this year expires.

Overall, gold will remain at the mercy of USD dynamics and oil price movements as markets remain cautious amid Trump’s threat and escalating tensions in the Middle East ahead of the weekend.

At the same time, gold’s daily technical setup strengthened the bearish bias following the confirmation of the Bear Cross, while momentum declined again.

Gold price technical analysis: daily chart

On the daily chart, XAU/USD is trading around $4,030 and remains under clear pressure, limiting below the 21-day uncomplicated moving average (SMA) at $4,068.50 and the 50-day SMA at $4,231.04. The pair is trading well below the long-term 100-day SMA of $4,479.88 and 200-day SMA of $4,494.74, reinforcing the bearish sentiment in the compact term. The Relative Strength Index (14) of around 44 remains in the Neutral to Soft area, suggesting that the downtrend is present but not yet overextended.

Upside, initial resistance is seen at the 21-day SMA near $4,068.50, followed by a more significant barrier at the 50-day SMA near $4,231.04. Above, the 100-day SMA at $4,479.88 and the 200-day SMA at $4,494.74 mark a stout resistance zone that needs to be reclaimed to moderate the broader bearish tone. In the absence of clear moving average support levels below the current price in this data set, any up-to-date decline will likely point in the direction of emerging horizontal levels or lower Fibonacci levels rather than established trend supports.

(The technical analysis for this story was written with the support of an AI tool. Find out more.)