Gold (XAU/USD) attracts some dip-buyers during the Asian session on Friday, stalling the previous day’s retracement slide from levels just above the $4,300 mark, or the highest since June 18. The commodity currently trades just above $4,250 and seems poised to register its best week since January. The upside, however, seems limited amid mixed signals over US-Iran peace talks and ahead of the crucial US monthly employment details.
US President Donald Trump told reporters on Thursday that he believed the war with Iran would be over soon. However, a Saudi official said that some Iraqi militia factions, in coordination with Yemen’s Iran-backed Houthis, are planning to attack the kingdom in the very near future. This raises the risk of a wider regional conflict and prompts traders to price in the geopolitical risk premium, which is seen acting as a tailwind for the safe-haven US Dollar (USD) and might cap gains for Gold.
Meanwhile, reports suggest that Iran is reviewing a framework agreement over the management of the Strait of Hormuz that would prohibit passage of US, Israeli, and hostile vessels until compensation was paid. This, in turn, dampens hopes for a diplomatic resolution to end the five-month-old US-Iran war. Moreover, Houthis claimed responsibility for an attack on a Saudi oil tanker in the Gulf of Aden, reviving concerns about energy supply disruptions, supporting oil prices and fueling inflation fears.
This might force global central banks, including the US Federal Reserve (Fed), to adopt a more hawkish stance, which should contribute to keeping a lid on the non-yielding Gold. According to CME Group’s FedWatch Tool, traders are still pricing in an over 80% chance that the US central bank will raise borrowing costs by the end of this year. This favors the USD bulls and warrants some caution before positioning for the resumption of the XAU/USD pair’s recent recovery from the $4,000 psychological mark.
Moreover, traders seem hesitant to place fresh directional bets and might opt to wait for the release of the closely-watched US Nonfarm Payrolls (NFP) report. The key labor market data will influence market expectations about the Fed’s future policy path and drive USD demand, which, in turn, should provide meaningful impetus to Gold.
Analysts at OCBC note that “near-term momentum has improved,” with the upcoming US payrolls report now seen as “key to whether the decline in yields, USD and gold’s breakout can be sustained.” They point out that gold was “last seen at $4,247 levels,” with “daily momentum is mildly bullish while RSI rose to near overbought conditions.” On the technical front, OCBC highlights “resistance at $4,333 (23.6% fibo retracement of 2026 high to low), $4,393 (100 DMA)” and “support at $4,160 (50 DMA), $4,077 (21 DMA),” suggesting a constructive bias while acknowledging that the sustainability of the recent move will hinge on the tone of US data.
XAU/USD daily chart
Technical Analysis: Gold needs to surpass 38.2% Fibo near $4,300 to back the case for further gains
This week’s breakout through the $4,165 confluence – comprising the 23.6% Fibonacci retracement level of the April-June slide and the 50-day Simple Moving Average (SMA) – was seen as a key trigger for bullish traders. Momentum indicators also align with this constructive tone, with the Relative Strength Index (RSI) at 61.29 and the Moving Average Convergence Divergence (MACD) above zero with a positive latest reading. This, in turn, suggests that buying pressure remains in control while the advance faces an emerging overhead hurdle near the 38.2% Fibo. level, around $4,300.
The aforementioned barrier is followed by the 50% retracement at $4,414 and the 61.8% level at $4,525, which together define a broad resistance zone before higher hurdles at $4,683 and $4,884. On the downside, immediate support is located around $4,265, with stronger demand expected at the 23.6% retracement at $4,165 and the 50-day SMA at $4,151. A deeper pullback toward the structural anchor near $3,943 would be needed to challenge the current bullish bias.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
