Gold is taking a breather after the initial run to over one-month highs near $5,400, kicking off the new week with a bang.
A global flight to safety theme, following the US-Israel joint attacks on Iran over the weekend, bolstered the demand for the traditional store of value, Gold.
Gold thrives on risk aversion and global uncertainty
Gold buyers resort to cashing in on their long positions, fuelling a modest retracement in the prices heading toward the European opening bells.
However, the bullish potential for Gold remains intact in the near-term amid continued geopolitical escalation in the Middle East.
The Times of Israel reported that the Israel Defence Force (IDF) struck Hezbollah targets in Beirut and across Lebanon in response to rocket fire.
Meanwhile, the UK Defense Ministry stated that British forces responded to a suspected drone strike at its military base in Cyprus.
Additionally, US President Donald Trump suggested the conflict could last for four more weeks, saying that attacks would continue until US objectives were met.
Gold also continues to draw support from surging Oil prices, caused by supply disruption fears, which could spike inflation and send the global economy into a tailspin once again. The bright metal is widely known as a hedge against inflation.
Several oil shipments were not permitted by Iran’s Islamic Revolutionary Guard Corps (IRGC) Navy to pass through the Strait of Hormuz.
“While Iran has yet to officially confirm that the vital waterway has been blocked, marine tracking sites showed tankers piling up on either side of the strait wary of attack or maybe unable to get insurance for the voyage,” according to the Guardian.
Looking ahead, all eyes remain on the Middle East tensions, while top-tier US economic data will also be awaited for fresh trading cues on Gold. However, geopolitical developments will continue to lead the sentiment.
US Defense Secretary Pete Hegseth is scheduled to hold a press conference at 13 GMT, according to the Defense Department on X.
Gold price technical analysis: Daily chart
The near-term bias is mildly bullish as price holds above the 21-day and 50-day Simple Moving Averages (SMAs), which both rise above the slower 100- and 200-day SMAs and signal an established uptrend. The Relative Strength Index (RSI) at 64.48 stays above the 50 midline, indicating firm but not extreme bullish momentum after cooling from earlier overbought readings. Price trades above the 50.00% Fibonacci retracement at $4,999.94 and the 61.80% retracement at $5,141.05 measured from the $4,401.99 low to the $5,597.89 high, reinforcing the view that recent pullbacks remain corrective within a broader advance.
Initial support aligns with the 21-day SMA near $5,036.64, ahead of the 50.00% retracement at $4,999.94, where a break would expose the 38.20% retracement at $4,858.82. Below that, the area around the rising 50-day SMA at $4,814.84 forms a deeper support zone. On the upside, immediate resistance emerges at the 78.60% retracement at $5,341.96, with a sustained break opening the way toward the prior swing high region near $5,598. A daily close above the 78.60% level would strengthen the bullish bias, while a drop through the 50.00% retracement would shift focus back to the lower supports.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.