After slipping to around $4,420 during the Asian session, Gold (XAU/USD) recovered and moved back above $4,500, extending Friday’s strong rally of more than 2.5%. The US Dollar Index (DXY) eased slightly from its recent monthly high, offering some support to the metal. However, expectations that global interest rates may remain elevated continue to limit any strong upside, as higher yields reduce the appeal of non-yielding assets like Gold.
Market sentiment remains cautious as investors increasingly expect central banks to stay hawkish due to rising inflation risks. Ongoing geopolitical tensions have added to these concerns, especially with reports suggesting a possible US ground move in Iran and increased involvement from Yemen’s Houthis. The Iran-backed group has already launched missile and drone attacks on Israel, warning of more strikes ahead. This escalation raises concerns about disruptions to key global trade routes such as the Bab el-Mandeb Strait and the Strait of Hormuz, keeping oil prices elevated and inflation pressures alive.
Adding to the outlook, the OECD has raised its US inflation forecast to 4.2%, significantly above earlier estimates and well beyond the Federal Reserve’s 2.7% target. It also expects the Fed to keep interest rates unchanged through 2027. Meanwhile, CME Fed Watch data shows more than a 50% probability of a rate hike in 2025. This supports the US Dollar and suggests traders should be cautious before expecting further gains in Gold. From a technical perspective, confirmation of a strong recovery would require sustained buying beyond recent levels, especially after the metal touched a low near $4,100 earlier this month.
Technically, Gold continues to trade within a narrow range, which can be seen as a bearish consolidation following its break below the 100-day Simple Moving Average (SMA). That said, last week’s bounce from the key 200-day SMA support level indicates that downside risks may be limited in the near term.
Momentum indicators still favor the bears. The MACD remains below its signal line in negative territory, while the RSI has recovered from oversold levels but is still hovering in the mid-30s, suggesting that selling pressure is easing but not fully reversed.
On the upside, immediate resistance is seen near the 100-day SMA around $4,630. A strong break above this level could push prices toward the next resistance near $4,880. On the downside, support is located around $4,380, followed by a stronger level near $4,300 if selling pressure increases further.
