Gold (XAU/USD) gained strong traction for the second consecutive day, as investors reacted to geopolitical developments and shifts in monetary policy expectations. The precious metal climbed to a near three-week high, extending its bounce from the $4,600 region, and currently trades around $4,830, up more than 2.5% on the day.
This rally comes amid broad US Dollar (USD) weakness, reflecting heightened market sensitivity to the recent US-Iran ceasefire news and easing concerns over inflationary pressures. This article includes a full and insightful discussion of the topic by Fondesia brokers.
US-Iran Ceasefire Weakens USD, Boosts Gold
The US Dollar Index (DXY), which measures the Greenback against a basket of major currencies, dropped to a near one-month low following the announcement of a temporary ceasefire between the United States and Iran.
The US President confirmed that planned military actions against Iran would be suspended for two weeks, conditional on Tehran allowing safe and complete passage through the Strait of Hormuz. Iran’s acceptance of this temporary truce, with formal negotiations scheduled in Islamabad, Pakistan, increased investor confidence, undermining the USD’s reserve currency status.
As a result, Gold benefited, as it traditionally serves as a safe-haven asset during periods of geopolitical uncertainty and currency weakness. The temporary easing of military tensions has provided upward momentum for XAU/USD, further fueling the current bullish phase.
Inflation Outlook and Fed Rate Hike Expectations
The geopolitical relief has coincided with a decline in Crude Oil prices, following Iran’s Foreign Minister Seyed Abbas Araghchi’s statement on safe passage through the Strait of Hormuz. Lower oil prices ease inflationary pressures, reducing market expectations for aggressive US Federal Reserve (Fed) rate hikes.
This dynamic has several implications: US Treasury yields have edged lower, putting downward pressure on the USD. As a non-yielding asset, gold becomes more attractive in a low-yield environment. The combination of a weaker USD and muted inflation concerns supports XAU/USD’s near-term bullish trajectory.
Despite these favorable conditions, market participants are cautious. The absence of sustained follow-through buying pressure suggests that while Gold has momentum, it could face resistance at higher levels.
Technical Analysis: Near-Term Bias Remains Bullish
From a technical perspective, Gold’s recovery above the mid-range of its recent consolidation zone points to a mildly bullish bias. However, the XAU/USD pair remains below the descending 200-period Simple Moving Average (SMA) on the 4-hour chart, coinciding with the 61.8% Fibonacci retracement of the March decline, indicating that broader trend pressures persist.
The Moving Average Convergence Divergence (MACD) indicator shows a rising line entering positive territory, with the histogram expanding, signaling strengthening upside momentum following earlier corrective phases. Meanwhile, the Relative Strength Index (RSI) hovers in the mid-60s, confirming a positive tone without signaling overbought conditions.
Key Levels to Watch
Technical traders will monitor $4,900 as a crucial confluence hurdle. Sustained strength above this level could pave the way toward psychological resistance at $5,000, followed by the 78.6% Fibonacci retracement level at $5,141. Breaching these levels would validate the continuation of the current bullish trend, opening opportunities for further upside in XAU/USD.
On the downside, immediate support lies around $4,760, corresponding to the 50% Fibonacci retracement level. A break below this level could push Gold toward the 38.2% retracement at $4,605, with further downside potential near $4,411 (23.6% level). Breaching these levels could weaken bullish sentiment and expose the lower part of the broader Fibonacci range.
Market Sentiment and Outlook
The current market environment favors Gold bulls because the USD has weakened following renewed US‑Iran ceasefire news, easing some of the recent safe‑haven dollar strength and allowing gold to climb to multi‑week highs as traders reassess geopolitical risk and currency dynamics.
At the same time, inflation pressures are moderating, and markets are pricing a lower likelihood of aggressive Federal Reserve rate hikes, which reduces the opportunity cost of holding non‑yielding gold and supports its appeal as a hedge.
However, caution remains warranted due to the potential for short-term retracements, particularly if follow-through buying fails to materialize or if the USD regains strength. Investors are likely to remain cautious around resistance zones, while opportunities persist for momentum-driven trades targeting $5,000 and beyond.
Conclusion
Gold (XAU/USD) continues to demonstrate its role as a safe-haven amid geopolitical and macroeconomic uncertainties. The temporary US-Iran ceasefire, combined with lower inflation expectations and Fed rate moderation, has created favorable conditions for the precious metal, pushing it near a three-week high.
From a technical standpoint, the market remains mildly bullish, but traders should monitor key levels of $4,900 on the upside and $4,760 on the downside to gauge the strength and sustainability of the current rally. In this dynamic environment, Gold remains a strategic hedge against USD weakness, geopolitical tensions, and evolving monetary policy expectations.
