Gold (XAU/USD) kicks off the week with a negative bias as slow progress toward a US-Iran ceasefire extension deal and fresh attacks in the Middle East keep buyers cautious.
Iran’s semi-official Tasnim News Agency reported that Tehran has suspended message exchanges with Washington over Israel’s military operations in Lebanon.
A higher interest rate environment raises the opportunity cost of holding non-yielding assets.
Resilient US economic data has also dimmed hopes for near-term interest rate cuts.
On the topside, initial resistance is seen at the $4,600 horizontal barrier, with a sustained break needed to expose the 100-day SMA near $4,802 as the next bullish objective.
Gold (XAU/USD) kicks off the week with a negative bias as slow progress toward a US-Iran ceasefire extension deal and fresh attacks in the Middle East keep buyers cautious. At the time of writing, XAU/USD is trading around $4,470 after briefly sliding below the $4,450 mark earlier in the American session.
Iran’s semi-official Tasnim News Agency reported that Tehran has suspended message exchanges with Washington over Israel’s military operations in Lebanon. The report comes as Israel expands its military offensive against Hezbollah in southern Lebanon.
US Central Command (CENTCOM) said it carried out “self-defense strikes” on Iranian radar and drone facilities over the weekend. Iran’s Revolutionary Guard said on Monday they had targeted an air base used by US forces in retaliation for an attack on southern Iran.
Iran’s Foreign Ministry spokesperson Esmaeil Baghaei said “lack of trust, constant changes in the US position and Israeli actions in Lebanon” are delaying the diplomatic process.
Negotiations between Washington and Tehran continue to face hurdles as both sides remain far apart on major issues such as Iran’s nuclear program, sanctions relief and the future status of the Strait of Hormuz.
Despite heightened geopolitical tensions, XAU/USD is down more than 15% since the war began and is nearly 20% below its all-time high near $5,600, set in late January. The US Dollar (USD) has emerged as the preferred safe-haven asset at the expense of Gold.
A stronger Greenback makes Gold more expensive for foreign buyers. Another headwind for the precious metal comes from the sharp rise in Crude Oil prices. West Texas Intermediate (WTI) Crude Oil is up more than 5% on Monday.
Higher energy costs are adding to inflationary pressure and reinforcing expectations that major central banks, including the Federal Reserve (Fed), may need to keep monetary policy tighter for longer.
While Gold is traditionally seen as a hedge against inflation, for now markets are paying more attention to where interest rates are headed. A higher interest rate environment raises the opportunity cost of holding non-yielding assets.
According to the CME FedWatch Tool, markets are pricing in a 40% chance of a 25-basis-point (bps) rate hike at the December meeting. Resilient US economic data has also dimmed hopes for near-term interest rate cuts.
Against this backdrop, any recovery in Gold is likely to attract selling interest unless Washington and Tehran reach a lasting agreement that drives Oil prices lower and helps ease inflation concerns.
On the data front, the S&P Global US Manufacturing Purchasing Managers Index (PMI) rose to 55.1 in May from 54.5 in April, while the ISM Manufacturing PMI climbed to 54.0, marking its highest reading since May 2022. Looking ahead, traders await the US Nonfarm Payrolls (NFP) report due on Friday for fresh clues on the Fed’s interest-rate path.
Technical analysis: XAU/USD stays bearish below $4,600 resistance
On the daily chart, XAU/USD holds a modest bearish bias, with price retreating below the nearby horizontal resistance at $4,600 while remaining capped well beneath the 100-day Simple Moving Average (SMA) at roughly $4,801.
The 200-day SMA at about $4,411 sits below spot and still underpins the broader uptrend, but the Relative Strength Index (RSI) near 43 and a modest Average Directional Index (ADX) around 24 suggest soft downside pressure in a relatively weak directional environment.
On the topside, initial resistance is seen at the $4,600 horizontal barrier, with a sustained break needed to expose the 100-day SMA near $4,802 as the next bullish objective.
On the downside, immediate support is provided by the 200-day SMA around $4,410, ahead of more substantial structural demand at the $4,100 horizontal level. A daily close below this latter floor would likely reinforce the prevailing bearish tone.
(The technical analysis of this story was written with the help of an AI tool.)
