Gold prices continued their decline during Tuesday's Asian trading session, with spot gold falling further below the key psychological level of $4,800. This movement partially reversed gains made the previous day from a one-week low. The price action reflects a combination of a stronger US dollar and ongoing geopolitical uncertainty. Investors remain highly skeptical about the potential for a substantive peace agreement between the United States and Iran, with escalating tensions in the Strait of Hormuz serving as a core driver of market volatility.
The escalation of geopolitical conflict has reignited concerns over oil prices and inflation. The US Navy's seizure of an Iranian-flagged cargo ship in the Gulf of Oman is viewed as part of broader blockade measures against Iran. In a direct response, Iran once again announced the closure of the Strait of Hormuz, a critical global oil transit route. The closure has directly pushed crude oil prices higher, subsequently renewing market worries about inflationary pressures. Rising oil prices have provided significant support for the US dollar, while gold, as a non-yielding asset, has faced clear downward pressure. This chain of events underscores how geopolitical incidents can swiftly dominate commodity market trends.
Despite this, the US dollar's rally is not without its challenges. The likelihood of further interest rate hikes from the Federal Reserve has diminished considerably, with markets pricing in approximately a 45% to 50% probability of rate cuts by year-end. This expectation limits the potential for further dollar appreciation and, simultaneously, offers crucial underlying support for gold. Traders are generally maintaining a cautious stance in the current environment, avoiding aggressive unilateral positions until the outcome of US-Iran negotiations becomes clearer. Consequently, investors are leaning towards a wait-and-see approach rather than anticipating another sharp decline, pending the emergence of strong, sustained selling pressure in gold.
New rounds of talks add another layer of uncertainty to the peace process. Former US President Donald Trump announced Monday that US negotiators would travel to Pakistan for a new round of discussions with Iran, aiming to extend a fragile ceasefire agreement originally set to expire on Wednesday. This news initially provided a degree of optimism. However, Iran's stance appears more rigid. Iranian officials have explicitly expressed reservations about further peace talks due to ongoing US blockade actions. An Iranian parliamentary speaker even emphasized that Iran would not accept any negotiations under threat. Simultaneously, Iran's foreign minister pointed to repeated US violations of the ceasefire as the primary obstacle to diplomatic progress.
Despite the clear divergence in positions, recent reports indicate that an Iranian delegation still plans to attend the talks in Islamabad. These conflicting signals make it difficult for the market to form a consensus. Investors are closely monitoring any new developments related to the US-Iran situation, as headlines could trigger significant financial market volatility at any moment.
Beyond geopolitics, Tuesday's trading will also focus on the congressional testimony from a nominee for Federal Reserve Chair. This testimony could provide additional trading cues for gold prices. Given the mixed fundamental signals, investors must exercise high caution when establishing large positions.
From a technical perspective, gold maintains a short-term constructive bias on the 4-hour chart. The price is currently testing support near the 55-period Exponential Moving Average around $4,783, which constitutes an important short-term support level. The 50% Fibonacci retracement level of the March decline, situated near $4,760, further reinforces the demand zone below. The Relative Strength Index (RSI) is hovering near a neutral level of 51, and while the Moving Average Convergence Divergence (MACD) indicator is slightly negative, overall momentum indicators do not show a strong directional bias. These signals suggest that bullish forces still hold structural control but currently lack sufficient follow-through buying to sustain an upward price movement.
If gold can defend the key support zone between $4,783 and $4,760, the short-term positive outlook remains viable. A sustained and forceful break below this area would open the path towards deeper Fibonacci support levels at $4,606 and $4,413, potentially eventually testing the broader swing low region around $4,099. On the upside, the 61.8% Fibonacci retracement level at $4,916 acts as initial resistance, with further hurdles at the 78.6% retracement at $5,114 and the cycle high near $5,419. Significant selling pressure in this region could halt the current rebound.
In summary, gold is navigating a complex environment shaped by a stronger US dollar, geopolitical uncertainty, and shifting Federal Reserve policy expectations. While the breach of the $4,800 level intensifies short-term downward pressure, expectations for Fed rate cuts provide important defensive support. Every development or setback in the US-Iran peace talks has the potential to trigger significant market volatility.
In this context, investors should avoid aggressive moves amidst incomplete information. The most prudent trading strategy involves closely monitoring the latest geopolitical headlines, paying attention to commentary from Federal Reserve officials, and combining this with technical key levels for a comprehensive assessment. Establishing corresponding positions should only be considered after clear and sustained trend signals emerge, enabling effective risk control and the capture of potential opportunities. The next phase for the gold market will ultimately depend on the actual progress of US-Iran negotiations and the genuine strength of the US dollar.
As of 14:08 Beijing Time, spot gold was trading at $4,784.19 per ounce.