Gold (XAU/USD) trades firmer on Wednesday after sliding to its lowest level in nearly two weeks at $4,842 the previous day, as dip buyers stepped in to limit the downside and keep the pullback relatively shallow. At the time of writing, XAU/USD is trading around $4,915, up nearly 0.75% on the day.
Despite the modest rebound, the yellow metal’s near-term outlook has turned mildly bearish, as evolving macro headwinds and a weakening technical structure continue to cap upside attempts.
Easing geopolitical risks and a firmer US Dollar cap upside momentum
Signs of progress in the latest US-Iran nuclear talks held in Geneva, along with ongoing US-led efforts to end the war between Russia and Ukraine, have helped ease geopolitical tensions, curbing safe haven flows into Bullion.
Iran’s Foreign Minister Abbas Araghchi said the two sides have reached a “general agreement on a set of guiding principles” for a potential nuclear deal. Reports also suggest that Iranian negotiators are expected to come back in two weeks with proposals for further discussion.
Meanwhile, a firmer US Dollar (USD) is also weighing on the precious metal, as resilient US labour market data has tempered expectations for an imminent Federal Reserve (Fed) interest rate cut. That said, moderating inflation has kept expectations of monetary policy easing alive in the second half of the year.
Fed Governor Michael Barr said on Tuesday that borrowing costs should stay unchanged for some time until there is clearer evidence that inflation is moving toward the 2% target. Meanwhile, Chicago Fed President Austan Goolsbee said further rate cuts could be possible this year if inflation continues to ease.
Investors’ attention now shifts to the US economic calendar, with January Industrial Production, December Durable Goods Orders, and the Federal Open Market Committee (FOMC) meeting minutes in focus.
On Friday, markets will also look to the advance estimate of US fourth-quarter Gross Domestic Product (GDP) and the Core Personal Consumption Expenditures (PCE) Price Index for further clues on the Fed’s monetary policy path, which could offer fresh direction for Gold.
Overall, the broader uptrend remains intact for the precious metal, with the current price action more likely reflecting a consolidation phase or temporary pause rather than a structural shift in underlying bullish momentum, as persistent macro and geopolitical drivers continue to provide a supportive backdrop.
Technical analysis: Bears hold edge as RSI stays below 50
From a technical perspective, the 4-hour chart highlights a clear tug of war between bulls and bears, reflecting the market’s indecisiveness. Price trades beneath the 100-period Simple Moving Average (SMA) at $5,011.07 and holds above the 200 SMA at $4,838.85, leaving a mixed bias with a mild bearish tilt.
The Relative Strength Index (14) sits at 43, below the 50 midline, reinforcing soft momentum. The Average True Range (14) has eased to 52.01, indicating contracting ranges that could precede a decisive move.
A sustained close above the 100-period SMA at $5,011.07 would strengthen short-term bullish momentum and signal a potential recovery toward higher resistance levels. Conversely, a break and close below the 200-period SMA would intensify bearish pressure, exposing the next downside targets at $4,800, followed by $4,700.
(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.
Source: https://www.fxstreet.com/news/gold-steadies-as-easing-geopolitical-tensions-and-firm-us-dollar-cap-gains-202602181128
