Gold prices (XAU/USD) held steady around $4,200 during early trading in Europe on Monday, seemingly breaking a three-day downward trend and bouncing back from a low point not seen for over a week. Meanwhile, oil prices dropped after Qatar and Pakistan announced a structured 60-day plan aimed at achieving a final peace agreement between the U.S. and Iran, which has alleviated some worries regarding inflation and interest rates, offering a bit of support for precious metals.
However, traders are still anticipating almost a 90% likelihood of the Federal Reserve increasing borrowing rates before the year ends. This sentiment was bolstered by the Fed’s stern outlook in the previous week, indicating a need to raise rates if inflation remains elevated. Additionally, the new Fed Chairman, Kevin Warsh, emphasized price stability in his press conference after the meeting, implying that the central bank might not quickly reduce rates even if economic growth slows. On another note, geopolitical events over the weekend suggest further support for the U.S. dollar (USD), which may limit any uplifts in gold prices.
Iran has accused the U.S. and Israel of breaching the ceasefire agreement and reinstated the closure of the Strait of Hormuz, citing ongoing Israeli actions in Lebanon. Furthermore, U.S. President Donald Trump has warned of potential military action against Iran should Hezbollah persist with its assaults on Israel, underscoring the delicate nature of the ongoing diplomatic efforts. This instability, combined with Russia intensifying its attacks on key Ukrainian cities recently, may contribute to a halt in the dollar’s recent pullback from its highest value since May 2025 and keep gold prices under pressure, putting bulls on alert.
The focus remains on U.S.-Iran relations, likely continuing to disrupt global financial markets. Additionally, remarks from influential members of the Federal Open Market Committee (FOMC) will affect demand for the U.S. dollar, which in turn could serve as some support for precious metals. Yet, given the current backdrop, any upward movement might be seen merely as a chance to sell and could dissipate rather quickly.
XAU/USD daily chart
The golden bull seems hesitant. 200 day EMA holds the key
From a technical standpoint, last week’s effort to shift the 200-day Exponential Moving Average (EMA) from support to resistance didn’t succeed, favoring bears for XAU/USD. The Relative Strength Index (RSI) is stuck in the high 30s, pointing to limited buying interest. Moreover, the Moving Average Convergence Divergence (MACD) remains in negative territory, with a slightly negative histogram that signals declining momentum but not a complete reversal.
On the upside, the 200-day EMA around $4,334 will be the first key level that bulls need to reclaim to ease existing bearish pressure. Unless this level is consistently regained on a daily closing basis, any rally might just be viewed as a corrective phase in a larger downtrend, and indications suggest that testing even lower levels isn’t out of the question.
