Gold Pulls Back Below $4,800 as Dollar and Yields Rise

Key Moments

Fundamental Drivers: Geopolitics, Inflation, and the Dollar

Gold (XAU/USD) comes under renewed selling pressure in the Asian session, extending its intraday decline below the $4,800 threshold and reaching a fresh daily low as European markets approach the open on Tuesday. The move unwinds a large portion of the prior session’s recovery from a one-week trough.

Market participants remain doubtful that the United States and Iran will quickly reach an agreement amid the ongoing confrontation over the Strait of Hormuz. The article notes that the U.S. Navy seized an Iranian-flagged cargo vessel in the Gulf of Oman as part of its blockade. In retaliation, Iran has again shut the key shipping route, which has been supportive for Crude Oil prices.

The resulting concern over potential supply disruptions feeds back into inflation worries, underpinning U.S. bond yields and offering the U.S. Dollar (USD) some relief. That firmer USD tone weighs on the dollar-denominated metal, contributing to the current pullback in gold prices.

Fed Outlook: Rate Cut Bets Temper Dollar Upside

Despite the latest support from inflation fears, the upside for the greenback appears constrained by shifting expectations for U.S. monetary policy. The article points to the CME Group’s FedWatch Tool, which shows that markets assign roughly a 45-50% probability to a Federal Reserve rate cut by year-end.

Those expectations act as a cap on any sustained USD rally and continue to provide an underlying tailwind to non-yielding bullion. This dynamic helps limit the extent of gold’s decline, even as near-term flows have tilted against the metal.

At the same time, traders are cautious about establishing large positions, given the uncertainty around whether negotiations to end the U.S.-Iran war will proceed. Against this backdrop, the article suggests that waiting for clear, strong follow-through selling would be prudent before positioning for a more pronounced downside move in XAU/USD.

U.S.-Iran Developments Keep Volatility Elevated

Political risk remains a central theme. The article reports that U.S. President Donald Trump stated that U.S. negotiators will travel to Pakistan for another round of discussions with Iran in an effort to prolong a fragile ceasefire, which is due to expire on Wednesday.

However, Iranian officials are portrayed as reluctant to deepen engagement, citing the continuing U.S. blockade. According to the article, Iranian Parliament speaker Mohammad Bagher Ghalibaf said that Iran will not accept negotiations while under threat. Furthermore, Iran’s Foreign Minister Abbas Araghchi stated that continued violations of the ceasefire by the U.S. are a significant barrier to the diplomatic process. Even so, reports indicate that an Iranian delegation is expected to travel to Islamabad for talks.

These conflicting signals ensure that markets remain fixated on incoming headlines around the U.S.-Iran situation, which could continue to generate volatility across asset classes, including gold.

Focus on Fed Chair-Designate Warsh’s Testimony

Beyond geopolitics, markets on Tuesday will also look to remarks from Fed Chairman-designate Kevin Warsh. The article notes that his testimony may provide fresh clues on policy direction and offer traders new opportunities around gold pricing.

Given the mix of inflation concerns, evolving Fed expectations, and geopolitical tension, the article emphasizes that the backdrop is fundamentally mixed. As a result, investors are encouraged to proceed cautiously before adopting aggressive directional stances in XAU/USD.

Technical Picture: Bullish Bias Intact Above Key Support

The article describes gold’s near-term technical outlook as constructive. The metal is trading above the 200-period Exponential Moving Average (EMA) on the 4-hour chart, located at $4,784.25, reinforcing a positive bias at current levels.

Additional support emerges from the 50.0% Fibonacci retracement of the March decline at $4,762.13, which sits just below the 200-period EMA and provides a secondary layer of demand. Momentum indicators are characterized as lacking strong direction, with the Relative Strength Index (RSI) hovering around a neutral 51 and the Moving Average Convergence Divergence (MACD) showing a slightly negative reading. This configuration suggests that bulls maintain structural control, but momentum has yet to reassert decisively.

On the downside, a sustained break beneath the cluster formed by the 200-period EMA at $4,784.25 and the 50.0% retracement at $4,762.13 would open the door toward lower Fibonacci supports at $4,607.05 and $4,415.17. Below these levels, the broader swing low region around $4,105.01 comes into focus.

On the upside, initial resistance is identified at the 61.8% Fibonacci retracement at $4,917.21. Above that, further barriers are located at the 78.6% retracement at $5,138.01 and the cycle high region near $5,419.25. The article notes that any rejection from this higher area would likely signal the end of the current bullish phase.

(The technical analysis of this story was written with the help of an AI tool.)

Inflation: Key Concepts for Market Participants

What is inflation?

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

What is the Consumer Price Index (CPI)?

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

How does inflation affect foreign exchange?

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.