Gold is gathering pace early Thursday, after having hit one-week highs above $4,700 on Tuesday. Markets remain expectant of a potential US-Iran peace deal being reached, supporting the renewed uptrend in Gold.
Gold looks north, with eyes on US-Iran de-escalation
Gold continues to cheer the broader market optimism around a likely end to the US-Iran war, especially after an Axios report stated that the United States (US) believes it could be closing in on a 14-point memorandum of understanding (MoU) with Iran.
Among the provisions the MoU lists are a suspension of Iranian nuclear enrichment, the lifting of sanctions, and restoring free transit through the Strait of Hormuz.
In response, Iran said on Wednesday it was reviewing a US peace proposal.
The potential peace deal could lead to the reopening of the Strait of Hormuz and enable maritime traffic back to normalcy, which could weigh negatively on Oil price and ease inflation fears.
The market optimism, combined with receding inflation fears, could dissuade the US Federal Reserve (Fed) from maintaining a pause in its easing cycle in the coming months.
This narrative continues to undermine the US Dollar (USD) against its major peers, as it erases all its gains since the war started, boding well for the non-yielding and USD-sensitive Gold.
That being said, the next big move in Gold hinges on the US-Iran deal headlines and Friday’s US Nonfarm Payrolls (NFP) data.
Economists are expecting the headline NFP to increase by about 60,000 in April after recording a blockbuster 178,000 job gain in March. The Unemployment Rate is seen steady at 4.3% in the same period.
The employment data is critical to know “whether the US economy remains resilient enough to keep the Fed’s monetary policy on hold, or whether a softening labor market could revive the case for rate cuts,” per Reuters.
Data published by the ADP on Wednesday showed that the US private employment rose by 109,000 jobs last month after a downwardly revised 61,000 gain in March, beating the 99,000 estimated print.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,702.05, holding just above the 21-day simple moving average (SMA) around $4,701, which leaves a mildly constructive short-term tone, especially after Gold closed Wednesday above the descending trendline resistance, then near $4,595, confirming an upside break from a falling wedge pattern.
The pair remains capped beneath the 100-day SMA near $4,774 and the 50-day SMA around $4,790, keeping the upside in check while a neutral-to-slightly bullish bias prevails as the Relative Strength Index (RSI) hovers around 51, hinting at steady but not emphatic bullish momentum.
On the topside, a sustained break above the $4,774 area defined by the 100-day SMA would expose the denser barrier at the 50-day SMA around $4,790. On the downside, immediate intraday support is aligned with the 21-day SMA just under price at about $4,701, ahead of the rising support trend line drawn from the $4,367 region, while the 200-day SMA near $4,307 forms a deeper structural floor if sellers regain control.
(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.