Gold (XAU/USD) is paring intraday losses on Friday as investors react to modern geopolitical news regarding the ongoing war in the Middle East. At the time of writing, XAU/USD is trading around $4,655, rebounding from the monthly low of $4,510 reached earlier this week.
Reports suggest that Iran has presented a modern proposal through Pakistani mediators in response to the latest US amendments. Iran’s state-run IRNA reported that Foreign Minister Abbas Araghchi had briefed his regional counterparts on Tehran’s position on ending the war.
This raised hopes that diplomatic efforts would continue despite the stalled talks. However, gold’s appreciation remains circumscribed due to continuing unfavorable macroeconomic factors. Rising energy costs since the beginning of the US-Iran war have caused inflation to rise in major economies, prompting central banks to reassess the path of monetary policy.
Major central banks, including the Federal Reserve (Fed), European Central Bank (ECB), Bank of England (BoE), Bank of Japan (BoJ) and Bank of Canada (BoC), have kept interest rates unchanged in their latest policy statements while emphasizing a data-driven approach. The overall tone has turned slightly hawkish as policymakers take stock of the inflation shock.
In this context, markets increasingly expect the Fed to delay interest rate cuts or even consider raising them if inflation pressures intensify. According to the CME FedWatch Tool, investors are currently pricing in a hold on interest rates for this year, while the probability of a rate hike by April 2027 has increased to 24.2%, up from just 1.9% a week ago.
In the case of gold, a shift towards higher longer-term interest rate expectations has led to steady downward pressure since the start of the war, with the metal posting two consecutive monthly losses despite its role as an inflation hedge and safe-haven asset. Non-yielding assets such as gold tend to perform well in a low interest rate environment because lower borrowing costs reduce the opportunity cost of holding them.
The metal is expected to trade on a downward trend in the near term, with any positive trend likely to be sold off as supply through the Strait of Hormuz remains largely disrupted, keeping oil prices high and focusing attention on inflation concerns.
Overall, the broader upward trend remains intact, supported by powerful structural demand, including continued central bank purchases and stable investment flows. According to the World Gold Council’s Gold Demand Trends Report for the First Quarter of 2026, total gold demand, including OTC investments, increased by 2% year-on-year to 1,231 tonnes, while central banks purchased about 244 tonnes, up 3%. Gold ETFs saw inflows of 62 tonnes in the first quarter, while demand for bars and coins increased 42% year-on-year to 474 tonnes.
Technical Analysis: XAU/USD remains capped within the 100-day SMA
On the daily chart, the XAU/USD pair maintains a short-term bearish bias as the spot trade remains below the 100-day basic moving average (SMA) at $4,762 and the 61.8% Fibonacci retracement at $4,603. The metal remains under corrective pressure after failing to hold recent highs, while the Relative Strength Index (RSI) of around 41 remains in bearish territory without reaching oversold conditions yet, suggesting that downside risk remains but the possibility of an occasional bounce is possible.
On the upside, initial resistance is currently leveled at the 61.8% retracement near $4,603, followed by a heavier barrier formed by the 50% retracement at $4,759 and the 100-day SMA at $4,761, with further headwinds in the form of the 38.2% retracement at $4,914 and the 23.6% level at $5,108. On the other hand, immediate support comes at the 78.6% retracement around $4,381, ahead of the 200-day SMA at $4,281 and the prior swing base near the 100% retracement at $4,099, where stronger buyers can be expected to defend the broader uptrend.
(The technical analysis for this story was written with the support of an AI tool.)
