Gold prices (XAU/USD) dropped by 0.7%, hovering around $4,030 during Thursday’s European trading session. Precious metals are under pressure from selling as inflation worries persist worldwide, especially with rising energy prices linked to heightened military tensions between the U.S. and Iran.
On the same day, a drone struck an oil tanker at Iraq’s Basra terminal, leading to a temporary halt in crude oil loading across all Iraqi terminals. This incident has sparked renewed concerns about diminishing oil supplies and, consequently, the likelihood of further increasing energy prices.
This situation has unsettled global inflation expectations and raised alarms about potential monetary tightening from central banks. Typically, rising interest rate expectations do not favor non-yielding assets like gold.
The ongoing conflict involving the U.S. and Iran could intensify. President Donald Trump has indicated he might authorize military action against Iranian infrastructure soon if negotiations do not resume, as mentioned in an interview with Fox News.
On the other hand, the Federal Reserve’s shift away from its aggressive stance seems to be providing some support for gold prices. Following a slowdown in U.S. consumer and producer inflation in June, traders have lowered their projections for Fed rate hikes.
The likelihood of an interest rate hike by the Fed at its July meeting dropped to 10.2%, down from 24.6% the previous week, according to the CME FedWatch tool.
Gold Technical Analysis
XAU/USD is currently trading close to $4,030, remaining below the 20-period exponential moving average (EMA) of $4,113.96, which suggests a bearish sentiment in the short term.
This downward bias is supported by a moderate Relative Strength Index (RSI) around 40, indicating persistent but weak selling pressure rather than being overly sold.
The first resistance level is underscored by the 20-day EMA at $4,113.96. A sustained break above this level is essential to mitigate the present bearish influence. Conversely, if gold prices drop below the June 30 low of $3,941.76, they could potentially trend down toward the October 28 low of $3,886.62.
(This technical analysis has been prepared with the assistance of AI tools.)
(This story was amended to clarify that traders revised their expectations for Fed rate hikes in response to cooling inflation in the U.S. for June, not July.)
Gold FAQ
Gold has historically played a vital role, serving as a store of value and medium of exchange. Even today, while it’s appreciated for its beauty in jewelry, it’s also seen as a safe asset—a reliable investment in volatile times. Many people view gold as a hedge against inflation and currency depreciation since it’s not reliant on any particular issuer or government.
Central banks hold the largest reserves of gold, typically aiming to bolster their currencies during crises. They buy gold to diversify their foreign exchange reserves and enhance their economic and currency strength perceptions. A healthy gold reserve can instill confidence in a country’s financial stability. In 2022, central banks added 1,136 tonnes of gold, approximately worth $70 billion, marking the highest annual purchase since these records began. Countries like China, India, and Turkey are rapidly increasing their gold holdings.
Gold has an inverse relationship with the U.S. dollar and U.S. Treasuries—key assets seen as safe havens. Typically, when the dollar weakens, gold prices rise, allowing investors and central banks to diversify during turbulent times. Additionally, gold’s pricing usually falls when stock markets rise, whereas declines in risky markets tend to benefit gold.
Prices can fluctuate significantly based on various factors. Geopolitical tensions and fears of a deep recession can drive gold prices up, given its safe-haven status. As a non-yielding asset, gold tends to increase when interest rates are low; however, rising costs can affect its appeal. Ultimately, how gold is priced also depends on the dollar’s performance, as it’s traded in dollars. A strong dollar can suppress gold prices, while a weak dollar can push them higher.
