Gold (XAU/USD) continues to show some resilience below the $4,700 mark, though it retains the negative bias heading into the European session on Thursday. The US Dollar (USD) gains positive traction for the third straight day as signs of friction between the US and Iran remained due to the American naval blockade of Iranian ports. Furthermore, a standoff over the Strait of Hormuz and dimming hopes for more rate cuts by the US Federal Reserve (Fed) act as a tailwind for the Greenback, exerting some pressure on the non-yielding yellow metal.
US President Donald Trump announced a temporary extension of the Iran ceasefire on Tuesday, just hours before it was set to expire. Investors, however, remain skeptical about a durable de-escalation amid the lack of progress in peace talks and rising tensions over the Strait of Hormuz. Trump had said that the US Navy blockade of Iranian ports will continue, while Iran has set the removal of the US naval blockade as a strict precondition for resuming negotiations. Furthermore, the Islamic Revolutionary Guard Corps (IRGC) said that it had captured two container ships on Wednesday, its first seizures since its war with the US and Israel began in February. This raises the risk of a further escalation of tensions and keeps geopolitical risks in play, underpinning the USD’s reserve currency status.
Meanwhile, continued disruptions to energy supplies through the strategic waterway remain supportive of elevated Crude Oil prices, which has led to a significant surge in global inflation. This, in turn, fuels speculation about a more hawkish stance from major central banks, including the Fed. Although Fed officials projected one rate cut by the end of this year, sticky inflation and resilient economic activity have increased the threshold for a reduction in borrowing costs. This might force the Fed to adopt a wait-and-see approach, which turns out to be another factor supporting the USD and contributes to driving flows away from the non-interest-bearing Gold. The XAU/USD bears now await acceptance below the $4,700 mark before placing fresh bets and positioning for a further depreciation.
XAU/USD 4-hour chart
Gold shows some resilience near $4,700, ascending channel support
The XAU/USD pair currently sits near the lower boundary of an upward-sloping parallel channel, showing a broadly neutral near-term tone. The Relative Strength Index (RSI) hovers near 39, leaning toward the lower end of its range and hinting at fading bullish momentum but not yet in oversold conditions. The Moving Average Convergence Divergence (MACD) indicator remains in negative territory, reinforcing that upside attempts may struggle until momentum improves.
Meanwhile, a convincing break below the trend-channel support around $4,691 would expose the prior structural base near $4,568 and pave the way for deeper losses if selling accelerates. On the topside, bulls would need a sustained break above the channel resistance at roughly $4,926 to revive the broader uptrend and open the way for additional gains.
(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.
