At the time of writing, XAU/USD trades around $4,367, extending its recovery from a nearly seven-month low of $4,023 touched last week.
The deal has improved market mood and eased fears of further disruptions to global energy supplies, pushing the US Dollar (USD) and Oil prices lower.
With Washington and Tehran now moving toward a peace agreement and the Strait of Hormuz set to reopen, the decline in Oil prices is easing inflation concerns, leading traders to scale back rate-hike bets and helping the metal recover.
Meanwhile, the Fed is unlikely to signal a return to monetary policy easing anytime soon.
Traders now turn their attention to the Fed's monetary policy announcement on Wednesday.
Gold (XAU/USD) starts the week on a positive note, rising more than 3% after the United States (US) and Iran reached a framework agreement to end the war in the Middle East. At the time of writing, XAU/USD trades around $4,367, extending its recovery from a nearly seven-month low of $4,023 touched last week.
A memorandum of understanding (MoU) is expected to be signed in Switzerland on Friday. US President Donald Trump said in a Truth Social post on Sunday that "the deal with the Islamic Republic of Iran is now complete" and announced the immediate removal of the US naval blockade of Iranian ports, while Iran would reopen the Strait of Hormuz.
The deal has improved market mood and eased fears of further disruptions to global energy supplies, pushing the US Dollar (USD) and Oil prices lower. West Texas Intermediate (WTI) Crude Oil falls to its lowest level in nearly three months, trading around $79 per barrel at the time of writing.
The precious metal, traditionally viewed as a hedge against inflation and geopolitical uncertainty, has behaved more like an interest rate-sensitive asset since the outbreak of the US-Iran war, as soaring Oil prices fueled inflation concerns and reinforced expectations that the major central banks, including the Federal Reserve (Fed), would keep interest rates higher for longer.
As a result, Gold lost nearly 20% of its value during the war as markets started to price in the possibility of a Fed rate hike later this year. A higher interest-rate environment increases the opportunity cost of holding non-yielding assets.
With Washington and Tehran now moving toward a peace agreement and the Strait of Hormuz set to reopen, the decline in Oil prices is easing inflation concerns, leading traders to scale back rate-hike bets and helping the metal recover.
However, further gains in Gold could be limited as the final agreement between Washington and Tehran has yet to be formally signed. Meanwhile, the Fed is unlikely to signal a return to monetary policy easing anytime soon.
US inflation has more than doubled from the central bank's 2% target in the wake of the war, suggesting borrowing costs could remain elevated in the coming months even if energy prices continue to decline.
Traders now turn their attention to the Fed's monetary policy announcement on Wednesday. While the central bank is widely expected to keep interest rates unchanged, investors will closely watch the updated economic projections and comments from newly appointed Chair Kevin Warsh for clues on the future path of monetary policy, which could set the tone for Gold's next move.
Technical analysis: RSI rebounds from oversold territory
In the daily chart, XAU/USD remains under short-term pressure, holding below the Bollinger Band mid-line 20-day Simple Moving Average near $4,415, keeping the immediate bias tilted lower.
The Relative Strength Index (RSI) has recovered from oversold territory and is currently near 45, indicating that selling pressure has eased. However, the indicator remains below the 50 mark, suggesting the broader trend has yet to turn decisively bullish.
On the topside, initial resistance is located at the Bollinger midline (20-day SMA) around $4,415, with the upper Bollinger band near $4,682 acting as the next cap if buyers manage to extend a rebound.
On the downside, first support emerges at the lower Bollinger Band near $4,149, ahead of a more strategic horizontal floor around $4,000, which is likely to attract stronger buying interest.
(The technical analysis of this story was written with the help of an AI tool.)
