Gold (XAU/USD) sticks to modest intraday gains through the Asian session on Tuesday, though it lacks bullish conviction and remains below the $5,050 level. There are a few signs that the US-Israeli war on Iran is ending soon amid the escalating conflict between Israel and Hezbollah in Lebanon. In fact, the Israeli military said that it is expanding ground assault in southern Lebanon – an area where the militant group Hezbollah is known to hold sway. This keeps geopolitical risks in play and turns out to be a key factor lending some support to the safe-haven precious metal.
As the war enters its third week, Iran continues to attack civilian infrastructure – airports, ports, oil facilities, and commercial hubs – in the six Gulf states with missiles and drones. Furthermore, the disruption of shipping through the Strait of Hormuz – a key chokepoint for a fifth of global oil supply – remains supportive of elevated Crude prices. This continues to fuel inflationary concerns, which could force the US Federal Reserve (Fed) to keep interest rates higher for longer and even consider rate hikes. The outlook, in turn, caps the non-yielding Gold and warrants caution for bulls.
Meanwhile, hawkish implications of the ongoing conflict in the Middle East revive the US Dollar (USD) demand following the overnight pullback from its highest level since May 2025 and contribute to keeping a lid on the XAU/USD pair. The USD bulls, however, seem hesitant and opt to wait for the outcome of a two-day FOMC meeting on Wednesday. Moreover, policy updates by other major central banks – the European Central Bank (ECB), the Bank of Japan (BoJ), and the Bank of England (BoE) – should provide a fresh impetus to the Gold during the latter part of the week.
XAU/USD 4-hour chart
Gold tests 200-period SMA support breakpoint; not out of the woods yet
The recent breakdown through the 200-period Simple Moving Average (SMA) on the 4-hour chart and acceptance below the 38.2% Fibonacci retracement level of the February-March move up favors the XAU/USD bears. Moreover, the Moving Average Convergence Divergence (MACD) indicator (12, 26, 9) remains below zero with the line under its signal and a negative histogram, signaling persistent downside momentum. The Relative Strength Index (RSI) at 41 leans toward the weak side of neutral and aligns with sellers retaining the initiative for now.
Immediate resistance emerges at the 38.2% Fibo. retracement near $5,040, followed by the 200-period SMA around $5,063, with a break above this zone needed to ease bearish pressure and open the way toward the 23.6% Fibo. retracement at $5,186. On the downside, initial support is located at the psychological $5,000 area, ahead of the recent lows near $4,995–$4,985, where failure would expose deeper retracement toward the 50.0% retracement level at $4,921.41. A sustained close back above the 200-period SMA would weaken the bearish tone, while continued rejection below $5,040 keeps the focus on lower supports.
(The technical analysis of this story was written with the help of an AI tool.)
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.
Read the full article here