XAU/USD recovers on US-Iran ceasefire hopes, but a Bear Cross looms
Gold sees a brief recovery stint for the second straight day on Wednesday, gaining roughly 2.5% so far, courtesy of the renewed market optimism induced by potential ceasefire talks between the United States (US) and Iran.
Gold recovers amid US-Iran ceasefire hopes
Gold buyers look to build on the upswing beyond the $4,600 level as the haven demand for the US Dollar (USD) retreats on the revival of risk trades.
Reuters reported that “the US is seeking a month-long ceasefire in its war on Iran and had sent a 15-point plan to Iran for discussion, raising hopes for a resumption of oil exports out of the Persian Gulf.”
The hopes for a Mideast ceasefire weighed heavily on Oil prices and eased concerns over higher inflation and interest rates. This, in turn, helped fuel a risk rally across the financial markets, sending US Treasury bond yields lower alongside the Greenback, while providing the much-needed relief to the bright metal.
However, a lack of details and certainty on when the ceasefire talks will be held, and whether there will be significant progress on a potential de-escalation, could keep Gold buyers on edge.
“Diplomatic sources say negotiations may begin in Islamabad next week, though no formal agreement is in place, the Guardian reports.
Meanwhile, tensions persist as two sources told Reuters on Tuesday that the Pentagon is set to send thousands of soldiers from the US Army’s elite 82nd Airborne Division to the Middle East.
Additionally, the technical setup on the daily chart continues to lean in favor of sellers in the near-term despite the price defending the critical the $4,400 level.
Therefore, it remains to be seen if Gold sustains the recovery momentum going forward.
Gold price technical analysis: Daily chart
The near-term bias is mildly bearish as price has slipped below the 21-day and 50-day Simple Moving Averages (SMAs), which now cap the market near $4,970 and $4,970–4,975 respectively, while the rising 100-day and 200-day SMAs far beneath price highlight that the broader uptrend remains intact. The 14-day Relative Strength Index (RSI) has recovered from oversold territory toward the mid-30s, which suggests fading downside momentum but does not yet indicate a strong recovery phase.
Adding credence to the persistent bearish sentiment, the 21-day SMA is on the verge of crossing the 50-day SMA from above, which if materialized on a daily closing basis would validate a Bear Cross.
Initial resistance emerges at the 21-day SMA around $4,970, followed by the 50-day SMA near $4,970–4,975, where a sustained break would open the way toward the $5,000 area. On the downside, immediate support is seen near the recent low around $4,490, with a decisive loss of this level exposing the rising 100-day SMA near $4,620 and then the 200-day SMA around $4,110. A daily close back above the clustered short-term averages would ease the bearish bias, while failure to reclaim them keeps focus on the lower supports.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
