Gold (XAU/USD) sticks to modest intraday gains heading into the European session on Thursday, though it lacks bullish conviction and remains below a nearly four-week high set the previous day. Despite hopes for Iran diplomacy, the instability in the Strait of Hormuz offers some support to the safe-haven US Dollar (USD), which turns out to be a key factor acting as a headwind for the commodity.
The US naval blockade of Iranian ports, imposed after the end of the Islamabad talks last Saturday, has been fully implemented. Moreover, the leader of Iran’s joint military command said that its military could halt trade in the Gulf region if the US does not lift its blockade. Iran has also demanded an end to Israeli attacks on Lebanon as a precondition for further talks with the US. However, Israel’s Prime Minister, Benjamin Netanyahu, indicated that he had not committed to a ceasefire and said that he instructed the IDF to continue thickening the security zone. This keeps geopolitical risks in play and underpins the USD’s reserve currency status, capping gains for the Gold.
Meanwhile, expectations for diplomatic efforts to end the conflict remain supportive of the prevailing risk-on mood and keep Crude Oil prices well within striking distance of a three-week low set on Tuesday. US President Donald Trump said that he believes the war with Iran may be coming to a conclusion soon, while the White House expressed optimism about reaching a deal to end the conflict. Moreover, reports suggest that there are growing prospects for a second round of peace talks between the US and Iran that could take place in a matter of days. This, along with easing concerns about the inflationary impact of the war-driven surge in energy prices, tempered hawkish US Federal Reserve (Fed) expectations.
According to the CME Group’s FedWatch Tool, late 2026 remains the primary window for potential easing by the US central bank. This might keep a lid on any meaningful USD gains and offer some support to the non-yielding Gold. This, in turn, warrants caution before positioning for any meaningful downside for the XAU/USD pair, though bulls might also refrain from placing aggressive bets amid the mixed fundamental backdrop.
XAU/USD 4-hour chart
Gold continues with its struggle to make it through 200-SMA pivotal resistance
The XAU/USD pair remains just under the 200-period Simple Moving Average (SMA) at $4,831.22, which acts as immediate overhead resistance and keeps the rebound in check. Meanwhile, the Moving Average Convergence Divergence (MACD) has turned positive, and the Relative Strength Index (RSI) hovers near 60. This hints at firm but not overheated bullish momentum that has yet to overpower the prevailing structural cap.
Hence, it will be prudent to wait for sustained strength and acceptance above the 200-SMA barrier before positioning for further gains to $4,916.20, or the 61.8% Fibonacci retracement level of the March downfall. A sustained break above the latter would be needed to ease the current ceiling and open the way toward $5,136.01 and then the cycle high area around $5,416.01.
On the downside, first support is aligned with the 50% retracement at $4,761.81, with additional layers of demand at the 38.2% Fibo. level near $4,607.41 and the 23.6% Fibo. around $4,416.39. The said support level would come into play if sellers regain control beneath the current consolidation.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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