Gold seems vulnerable as war-driven inflation fears bolster hawkish central bank bets
- Gold attracts sellers for the tenth straight day amid hawkish stances from major central banks.
- The Iran war fuels inflation fears, bolstering bets that central banks will consider raising rates.
- A fresh leg up in US bond yields and reviving USD demand further undermine the commodity.
Gold (XAU/USD) meets with a fresh supply during the Asian session on Tuesday and stalls the overnight recovery from a four-month low, around the $4,100 mark, representing a technically significant 200-day Simple Moving Average (SMA). The Iran war continues to fuel inflation fears, curbing bets for interest rate cuts and undermining the non-yielding yellow metal. Furthermore, the emergence of some US Dollar (USD) buying turns out to be another factor exerting pressure on the commodity.
Iran denied that it had held talks with the US to end the war, contradicting US President Donald Trump’s remarks on Monday that a deal could be reached soon. Moreover, Mohsen Rezaei, the senior military adviser to Iranian Supreme Leader Mojtaba Khamenei, said that the war will continue until Iran receives full compensation for the damage it has sustained. Adding to this, energy infrastructure in Iran has reportedly come under renewed pressure, which, along with the effective closure of the Strait of Hormuz, assists Crude Oil prices to regain positive traction. This, in turn, bolsters bets that central banks around the world will once again consider raising interest rates to curb renewed inflationary pressures and keeps the Gold price depressed for the tenth straight day.
Meanwhile, traders have nearly fully priced out the possibility of any further interest rate cuts by the US Federal Reserve (Fed) and are rapidly increasing bets for a hike by the end of this year. This, in turn, triggers a fresh leg up in US Treasury bond yields, which assists the USD to regain positive traction and contributes to driving flows away from the precious metal. That said, fading hopes for a de-escalation of tensions in the Middle East keep a lid on the overnight market optimism. This, in turn, could offer some support to the safe-haven Gold and hold back bearish traders from placing aggressive bets. As the US-Iran conflict drags on further, market participants now look forward to the release of the global flash PMIs to grab short-term opportunities.
XAU/USD daily chart
Gold seems vulnerable as 100-day SMA breakdown remains in play; $4,100 holds the key
From a technical perspective, last week’s breakdown below the 100-day SMA was seen as a key trigger for the XAU/USD bears. The subsequent slump, however, found decent support near the 200-day SMA, around the $4,100 mark, which should now act as a key pivotal point.
Meanwhile, the Moving Average Convergence Divergence (MACD) indicator (12, 26, 9) remains below its signal line in negative territory with an expanding downside histogram, reinforcing strengthening selling pressure. The Relative Strength Index (RSI) at 25.82 sits in oversold territory, which highlights downside dominance but also warns that the current bearish leg is becoming stretched.
In the meantime, the current low around $4,355 is the first support to watch, and a decisive close below this level would extend the downtrend toward the $4,300 region and then $4,100, nearer to the 200-day SMA, where medium-term dip buyers could attempt to stabilize the metal.
On the upside, immediate resistance emerges near $4,650, where a recent consolidation high aligns ahead of the falling short-term trajectory and guards the $4,820 area, with the 100-day SMA higher around $4,610 acting as an intermediate dynamic cap. A break above these layers would be needed to ease bearish pressure and open the way toward $5,000. On the downside,
