Gold remains depressed below $4,700 as US-Iran tensions and inflation fears underpin USD

Gold (XAU/USD) kicks off the new week on a weaker note and remains on the defensive below the $4,700 mark through the Asian session amid the emergence of some US Dollar (USD) buying. Persistent geopolitical uncertainties, along with hawkish US Federal Reserve (Fed) expectations, underpin the USD's reserve currency status and act as a headwind for the bullion. The lack of follow-through selling, however, warrants some caution before confirming that the recent goodish rebound from the $4,500 psychological mark, or over a one-month low touched last week, has run out of steam.

The optimism over a potential US-Iran peace deal and the de-escalation of conflict faded quickly amid renewed hostilities in the Strait of Hormuz. Adding to this, US President Donald Trump and Iran both rejected each other’s peace proposals for ending the war and the gradual reopening of the Strait of Hormuz amid major disagreements over Iran's nuclear program. In fact, the Wall Street Journal reported that Iran has rejected US demands to dismantle its nuclear facilities and suspend uranium enrichment for 20 years. Trump quickly lashed out at the Iranian response, calling it "totally unacceptable." This keeps geopolitical risks in play and regains some positive traction on Monday, which, in turn, is seen exerting some pressure on the Gold price.

Meanwhile, the latest development triggers a fresh leg up in Crude Oil prices and revives inflationary concerns. This, along with the upbeat US employment data released on Friday, backs the case for a more hawkish Fed going forward. The popularly known US Nonfarm Payrolls (NFP) report showed that the economy added more-than-expected 115K new jobs in April, while the Unemployment Rate held steady at 4.3%. Moreover, the CME Group's FedWatch Tool indicates that traders are currently pricing in just over a 20% chance that the US central bank would deliver at least one 25-basis-point (bps) rate hike by the end of this year. The outlook, in turn, favors the USD bulls and backs the case for a further downfall for the non-yielding Gold.

Traders, however, seem reluctant to place aggressive directional bets and opt to wait for the release of US inflation figures – the Consumer Price Index (CPI) and the Producer Price Index (PPI) on Tuesday and Wednesday, respectively. Apart from this, investors this week will confront the release of US monthly Retail Sales, which, along with speeches from influential FOMC members, will play a key role in driving the USD demand and providing some impetus to the Gold price. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for the XAU/USD pair remains to the downside. Hence, any intraday move up beyond the $4,700 mark could be seen as a selling opportunity and is likely to be capped.

XAU/USD 4-hour chart

Gold traders might refrain from placing aggressive directional bets amid mixed technical setup

From a technical perspective, the precious metal holds a neutral tone following last week's repeated failures to make it through the 61.8% Fibonacci retracement level of the April-May downfall. The subsequent slide, however, stalls near the 200-period Simple Moving Average (SMA). Moreover, the Relative Strength Index (RSI) hovers just above the 50 line, hinting at modest positive bias, while the Moving Average Convergence Divergence (MACD) remains below zero with a negative reading, suggesting that bullish momentum is not yet fully convincing.

In the meantime, the 50.0% retracement around $4,696 is likely to act as an immediate resistance, with further hurdles seen at the 61.8% level near $4,743 and then the 78.6% retracement around $4,810. A sustained break above these barriers would open the way toward the recent cycle high close to $4,894. On the downside, the 200-period SMA at $4,675 offers immediate support ahead of the 38.2% Fibo. retracement near $4,650, with deeper protection seen at the 23.6% level around $4,592 and the structural low region anchored near $4,498.

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