Gold sticks to modest gains above $4,550 on weaker USD; upside remains capped
- Gold kicks off the new week on a positive note as US-Iran peace deal hopes undermine the USD.
- The US and Iran remain at odds over key issues, helping limit USD losses amid hawkish Fed bets.
- The technical setup warrants caution for bulls before positioning for further appreciation.
Gold (XAU/USD) remains capped below the top boundary of a nearly one-week-old range through the early European session and trims a part of its modest intraday gains to the $4,580 region on Monday amid mixed fundamental cues. Developments over the weekend spurred hopes for a potential US-Iran peace deal, undermining the US Dollar's (USD) reserve currency status and lending support to the commodity. The US and Iran, however, remain at odds over key issues. This, along with hawkish US Federal Reserve (Fed) expectations, helps limit the USD losses and keeps a lid on any further gains for the non-yielding yellow metal.
Axios reported late Saturday, citing a US official, that the US and Iran are close to signing an agreement that involves a 60-day ceasefire extension during which the Strait of Hormuz would be reopened. Adding to this, US President Donald Trump said that the framework for a peace deal with Iran was largely negotiated. This boosts investors' confidence and the resultant slump in Crude Oil prices ease inflationary fears, triggering a steep decline in US Treasury bond yields amid relatively thin liquidity as many global markets are closed for holidays. This, in turn, is seen weighing heavily on the Greenback.
Meanwhile, Trump explicitly instructed his representatives not to rush into a deal with Iran and said that a naval blockade of Iranian ports will remain in effect until a formal, certified agreement is signed. Furthermore, major disagreements over Iran's nuclear program should cap the optimism. Moreover, bets that the US Fed will hike interest rates in 2026 could act as a tailwind for the USD. This, in turn, makes it prudent to wait for some follow-through buying before confirming that the Gold has formed a near-term bottom around the $4,450 area, or its lowest level since late March, touched last week.
XAU/USD 4-hour chart
Gold bulls seem hesitant; ascending channel hurdle and 200-SMA on H4 holds the key
From a technical perspective, the XAU/USD pair holds within a downward parallel channel. The channel ceiling coincides with the 200-period Exponential Moving Average (EMA) on the 4-hour chart, forming a cluster resistance near the $4,650 area, suggesting that rallies remain vulnerable despite the positive undertone in momentum. The Moving Average Convergence Divergence (MACD) is above zero, and the histogram is still positive. Moreover, the Relative Strength Index (RSI) hovers in the mid-50s, hinting at a tentative recovery rather than a clear trend shift.
On the downside, the lower boundary of the parallel channel around $4,360 marks the next key support area. A break beneath this floor would reinforce the broader bearish structure and open the door to a deeper correction within the medium-term downtrend.
(The technical analysis of this story was written with the help of an AI tool.)
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.