Gold rises on Middle East tensions; inflation fears temper rate cut bets and cap gains
Gold attracts some safe-haven flows amid a further escalation of tensions in the Middle East.
Inflation fears temper Fed rate cut bets, underpinning the $USDE and capping the commodity.
Traders seem reluctant to place aggressive bets ahead of this week’s key central bank events.
As the war enters its third week, Iran continues to attack civilian infrastructure – airports, ports, oil facilities, and commercial hubs – in the six Gulf states with missiles and drones. Furthermore, the disruption of shipping through the Strait of Hormuz – a key chokepoint for a fifth of global oil supply – remains supportive of elevated Crude prices. This continues to fuel inflationary concerns, which could force the US Federal Reserve (Fed) to keep interest rates higher for longer and even consider rate hikes. The outlook, in turn, caps the non-yielding Gold and warrants caution for bulls.
Meanwhile, hawkish implications of the ongoing conflict in the Middle East revive the US Dollar (USD) demand following the overnight pullback from its highest level since May 2025 and contribute to keeping a lid on the $XAU /USD pair. The USD bulls, however, seem hesitant and opt to wait for the outcome of a two-day FOMC meeting on Wednesday. Moreover, policy updates by other major central banks – the European Central Bank (ECB), the Bank of Japan (BoJ), and the Bank of England (BoE) – should provide a fresh impetus to the Gold during the latter part of the week.
Gold seems vulnerable as breakdown below 200-period SMA and 38.2% Fibo. level remains in play
The recent breakdown through the 200-period Simple Moving Average (SMA) on the 4-hour chart and acceptance below the 38.2% Fibonacci retracement level of the February-March move up favors the XAU/USD bears. Moreover, the Moving Average Convergence Divergence (MACD) indicator (12, 26, 9) remains below zero with the line under its signal and a negative histogram, signaling persistent downside momentum. The Relative Strength Index (RSI) at 41 leans toward the weak side of neutral and aligns with sellers retaining the initiative for now.
Immediate resistance emerges at the 38.2% Fibo. retracement near $5,040, followed by the 200-period SMA around $5,063, with a break above this zone needed to ease bearish pressure and open the way toward the 23.6% Fibo. retracement at $5,186. On the downside, initial support is located at the psychological $5,000 area, ahead of the recent lows near $4,995–$4,985, where failure would expose deeper retracement toward the 50.0% retracement level at $4,921.41. A sustained close back above the 200-period SMA would weaken the bearish tone, while continued rejection below $5,040 keeps the focus on lower supports.
$XAU /USD 4-hour chart
