Gold Gains as Iran Talks Offset Fed Rate Concerns

Key Moments

Geopolitical Optimism Supports Gold Prices

Gold (XAU/USD) is moving higher on Monday as investors respond to encouraging signs from negotiations between the United States and Iran. The advance follows the first round of direct talks held earlier in the day in Switzerland, with Pakistan and Qatar serving as mediators.

At the time of writing, XAU/USD is trading around $4,205, marking a gain of nearly 1.25% on the session.

US Vice President JD Vance said negotiators had laid “a very good foundation for a successful final deal” and added that the Strait of Hormuz is open.

In a joint statement released earlier, Qatar and Pakistan said that Washington and Tehran had agreed on a roadmap to reach a final deal within 60 days. The parties also agreed to continue technical-level discussions through the rest of the week.

Despite the constructive tone, market participants appear cautious about aggressively extending long positions in XAU/USD ahead of further developments in the talks. The broader policy backdrop from the Federal Reserve continues to act as a constraint on the metal.

Fed Expectations, Dollar Strength, and Yields Cap Upside

Easing Middle East tensions have driven Oil prices back toward pre-war levels, alleviating some concerns over a prolonged, energy-driven inflation shock. However, the earlier spike in energy costs has already fed into US inflation, prompting Fed officials to adopt a more hawkish stance at last week’s monetary policy meeting.

Market pricing, as reflected by the CME FedWatch Tool, shows traders assigning a 73% probability to a rate hike in September. Expectations that US interest rates could stay elevated for an extended period are helping to keep the US Dollar near recent highs and pushing US Treasury yields higher.

The yield on the policy-sensitive US 2-year Treasury note climbed to 4.23% on Monday, its highest reading since February 2025. This backdrop of firm yields and a supported Dollar is limiting the extent of gold’s rebound.

Near term, the outlook for XAU/USD remains skewed to the downside, with rallies seen as vulnerable to renewed selling. Investors will be closely monitoring the upcoming US Personal Consumption Expenditures (PCE) inflation report later this week. Any surprise in that data could alter interest rate expectations and, consequently, influence gold price dynamics.

Technical Picture: Key Moving Averages in Focus

XAU/USD continues to exhibit a bearish short-term structure while trading beneath its 200-day Simple Moving Average (SMA), currently around $4,469. The Relative Strength Index (RSI) on the daily chart is hovering near 40, signaling subdued momentum, and the Moving Average Convergence Divergence (MACD) indicator remains slightly negative. Together, these signals suggest that attempts to recover are likely to encounter selling interest near overhead technical levels.

On the upside, the first significant obstacle for bulls is aligned with the 200-day SMA near $4,469. If buyers manage to extend the recovery beyond that zone, a more robust ceiling is seen at the 100-day SMA around $4,714.

On the downside, the next important support level is located around the horizontal line at $4,000. A decisive move below this area would expose XAU/USD to further weakness and reinforce the prevailing bearish technical pattern.