Gold (XAU/USD) retains its positive bias for the third straight day and trades above the $4,700 mark, closer to a one-and-a-half-week high, heading into the European session on Thursday. Bulls, however, seem hesitant and opt to wait for further clarity over a potential US-Iran peace deal before positioning for further gains. Meanwhile, the downside remains cushioned on the back of fading expectations for a more hawkish US Federal Reserve (Fed) and a broadly weaker US Dollar (USD), which tends to underpin demand for the bullion.
US President Donald Trump struck an optimistic tone on Wednesday, saying that negotiations had made progress over the past 24 hours and that an agreement with Iran was very possible. Adding to this, the news outlet Axios reported that the US and Iran are very close to finalizing a deal. However, Iran’s state-linked media pushed back against claims of a broader agreement and said, citing information from the Iranian Students’ News Agency, that the US proposal includes provisions that Tehran has already rejected in recent days.
Adding to this, the BBC reported that Iran is reviewing a one-page memorandum of understanding with the US that would gradually reopen the Strait of Hormuz and lift the American blockade on Iranian ports. Furthermore, Trump threatened that Iran would be bombed “at a much higher level and intensity than it was before” if it didn’t agree to a peace deal. Moreover, investors reassess the likelihood of a deal amid major disagreements over Iran’s nuclear program. This, in turn, is seen as a key factor acting as a headwind for the Gold.
On the economic data front, the US ADP report showed on Wednesday that private-sector employment grew by 109K in April, compared to a downwardly revised reading of 61K in the previous month. This better-than-expected print indicates continued, though uneven, strength in the US labor market. Moreover, the CME Group’s CME FedWatch Tool suggests that traders are still pricing in the possibility of a Fed rate hike by the end of this year. This helps limit further USD losses and contributes to capping gains for the non-yielding Gold.
Traders now look to the US Weekly Initial Jobless Claims data, which, along with speeches from influential FOMC members, might provide some impetus later during the North American session. The focus, however, will remain glued to the closely-watched US Nonfarm Payrolls (NFP) report, due on Friday. Apart from this, further developments surrounding the Middle East crisis might continue to infuse some volatility across the global financial markets and help traders to determine the next leg of a directional move for the Gold price.
XAU/USD 1-hour chart
Gold bulls not ready to give up amid constructive setup
Wednesday’s breakout through the 200-hour Exponential Moving Average (EMA) and a subsequent strength beyond the 38.2% Fibonacci retracement level of the downfall from the April swing high were seen as key triggers for the XAU/USD bulls. The precious metal is also holding above the 50% retracement level, reinforcing the constructive bias.
Meanwhile, the Relative Strength Index (RSI) around 65 keeps the tone positive but shy of overbought territory, indicating room for another push higher while leaving the metal vulnerable to a corrective pullback if buyers lose traction. Moreover, the Moving Average Convergence Divergence (MACD) remains below the zero line with a negative reading, hinting that upside momentum is not yet fully convincing.
On the topside, immediate resistance is seen at the 61.8% Fibonacci retracement at $4,741.58, followed by a higher barrier at the 78.6% level near $4,807.61, with the recent cycle high around $4,891.72 capping the broader bullish scenario. On the downside, initial support is located at the 50% retracement at $4,695.20, ahead of a more substantial demand band around the 38.2% level at $4,648.82 and the 200-EMA at $4,634.46; a sustained break below this area would expose the 23.6% retracement at $4,591.44 and, if selling accelerates, the swing low near $4,498.68.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
