Gold Under Pressure as Dollar Gains on Fed Mideast Risk

Key Moments

Gold Retreats as Dollar Demand Recovers

Gold (XAU/USD) comes under fresh selling pressure during the Asian session on Thursday, with offers emerging in the $4,246-$4,247 band. This pullback interrupts the strong rebound seen a day earlier from its weakest level since November 2025. The renewed move lower tracks a recovery in demand for the safe-haven US Dollar (USD), which is being supported by uncertainty surrounding a possible peace agreement between the United States and Iran, as well as expectations for a more hawkish Federal Reserve (Fed).

Stronger USD demand is a key headwind for the non-yielding metal, as higher interest-rate expectations continue to draw capital away from bullion. As a result, XAU/USD remains on course to post sizeable weekly declines for a second week in a row.

Conflicting Signals on US-Iran Deal Boost Safe-Haven Flows

US President Donald Trump said on Thursday that a deal had been reached with Iran and that the final document could be signed soon, potentially as early as the weekend. Initial optimism faded quickly, however, after Iran responded that it had not reached a final decision on an agreement. In addition, reports indicate that Iran’s new Supreme Leader, Mojtaba Khamenei, has not endorsed the proposed US peace accord.

Further ambiguity emerged after Iran’s Foreign Ministry reportedly stated that critical points – including Hormuz access and frozen funds – are still unresolved, according to Fars. These lingering issues have kept markets on edge regarding the trajectory of negotiations.

On the ground, tensions remained evident. Iranian forces blocked a tanker from passing through the key waterway without coordination, highlighting continued uncertainty over Iran’s stance. Separately, Fox News reported that US forces intercepted and destroyed two Iranian one-way attack drones near the Strait of Hormuz. These developments have sustained geopolitical risk premiums and helped spark a modest rebound in Crude Oil prices, adding to inflation concerns.

Higher-for-Longer Fed Bets Weigh on Bullion

The recent move higher in Crude Oil comes alongside signs that US inflation is re-accelerating, reinforcing the case for interest rates to remain elevated. This backdrop has further strengthened expectations that the Fed will maintain a hawkish posture.

The latest US Consumer Price Index (CPI) and Producer Price Index (PPI) readings released this week indicated a renewed pickup in inflation, reinforcing views that the US central bank may raise borrowing costs by year-end. These data points have provided an additional boost to the Greenback and deepened the drag on Gold.

Even so, some market participants appear reluctant to establish sizeable new short positions in XAU/USD, opting instead to await clearer signals on the evolving situation in the Middle East. Despite this caution, the metal is still on track to log heavy losses for the second consecutive week.

Technical Picture: Bearish Bias Intact Below 200-Day SMA

From a technical standpoint, Gold retains a negative short-term bias while trading under the 200-day Simple Moving Average (SMA). The inability on Friday to decisively clear the 23.6% Fibonacci retracement of the decline from the April monthly high points to the likelihood that the recent bounce was driven mainly by short covering rather than the start of a sustained recovery.

The Moving Average Convergence Divergence (MACD) indicator remains below the signal line in negative territory, with the histogram still in the red. At the same time, the Relative Strength Index (RSI) is holding in the mid-30s. Together, these readings suggest that downside forces remain in place despite the modest rebound off recent lows.

Key Technical Levels for XAU/USD

On the upside, the first notable resistance level is the 23.6% Fibonacci retracement near $4,229. Above that, the 38.2% retracement sits close to $4,355. A more substantial barrier is located around the 200-day SMA at approximately $4,450, which is closely aligned with the 50% retracement near $4,456. A break above these levels would expose the 61.8% Fibonacci retracement at $4,558, followed by the 78.6% level near $4,703, opening the door toward the $4,887 cycle high.

On the downside, the recent swing low around $4,026 is the primary support to monitor. A decisive move below that area would indicate potential for a deeper corrective phase to unfold.

US Dollar Performance Against Major Currencies

The following table shows the percentage change of the US Dollar (USD) versus major peers today. According to the data, the USD is strongest against the New Zealand Dollar.