Gold (XAU/USD) remains virtually unchanged at $4,790 on Monday as investors return to the safety of the US dollar (USD) amid threats to the US-Iran peace process. Looking at the bigger picture, the precious metal is moving back and forth in the upper range of the horizontal channel of the last two weeks, with key resistance at $4,850.
A spokesman for the Iranian Foreign Ministry threatened to do so skip the peace process after the United States seized Iranian cargo on Sunday, which Tehran deemed an “aggressive act” and a ceasefire violation.
However, investors have not completely ruled out the possibility of both countries returning to the negotiating table on Tuesday, which is keeping the US dollar from rising further.
Technical analysis
XAU/USD is trading at USD 4,790 with a neutral to slightly bearish bias as it is just below the top of the horizontal channel of the last two weeks at USD 4,850. Technical indicators on the 4-hour chart show no obvious deviation.
The moving average convergence divergence (MACD) remains negative while the relative strength index (RSI) is hovering near the 50 line, indicating weakening growth momentum rather than outright selling pressure.
The session lows in the $4,730 area are keeping the bears at bay for now, keeping the lower part of the channel in the $4,600 area at a unthreatening distance. On the other hand, bulls should break the mentioned $4,850 area (April 8, 14 and 15 highs), which would expose previous support turned resistance just above $5,000.
(The technical analysis for this story was written with the aid 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 employ 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 unthreatening 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 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 at 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 robust dollar tends to keep the gold price in check, while a weaker dollar will likely cause gold prices to rise.
