Gold (XAU/USD) sticks to a negative bias for the third straight day, though it lacks follow-through selling and remains confined in the previous day's broader range heading into the European session on Tuesday. Hopes for a last-minute agreement between the US and Iran are fading ahead of President Donald Trump’s Tuesday evening deadline to reopen the Strait of Hormuz. This benefits the US Dollar's (USD) global reserve currency status and undermines the commodity. Adding to this, bets for higher interest rates globally turn out to be another factor exerting some pressure on the non-yielding yellow metal and back the case for further losses.
Investors now seem convinced that the war-driven surge in energy prices would revive inflationary pressures and force major central banks, including the US Federal Reserve (Fed), to adopt a more hawkish stance. In fact, Crude Oil prices advanced to a four-week top after Trump heightened his rhetoric against Iran and threatened to decimate civilian infrastructure if the deadline passed without a deal. In response, the advisor to Iran's Parliament Speaker, Mohammad Bagher Ghalibaf, emphasized that Iran will not back down and said that Trump has about 20 hours to either surrender or his allies will return to the Paleolithic Age. This raises the risk of a further escalation of conflicts in the Middle East and remains supportive of elevated Crude Oil prices.
Meanwhile, data from the Institute for Supply Management (ISM) showed on Monday that the Services PMI fell short of market expectations and eased to 54 in March from 56.1 in the previous month. pointing to some loss of momentum. Additional details of the report revealed that inflation pressures gathered traction, with the Prices Paid Index edging higher to 70.7 from 63. This comes on top of the upbeat US Nonfarm Payrolls (NFP) report last Friday, which signaled a resilient labor market, and boosted bets that the Fed will hold rates higher for longer to combat inflation. The outlook, in turn, favors the USD bulls and suggests that the path of least resistance for the Gold price is to the downside. Traders now look to the US macro data for a fresh impetus.
XAU/USD 4-hour chart
Gold's bearish technical setup backs the case for further losses
The near-term bias is mildly bearish as the XAU/USD pair holds below the downward-sloping 200-period Simple Moving Average (SMA) on the 4-hour chart. The Moving Average Convergence Divergence (MACD) histogram remains negative with the line below the signal and hovering around the zero line, which suggests lingering downside pressure but without strong momentum. Moreover, the Relative Strength Index (RSI) around 49 shows neutral momentum, aligning with a consolidative tone within a broader downside context.
Immediate resistance emerges near the 38.2% Fibonacci retracement level of the March downfall, at $4,607, and a sustained break above would open the way toward the $4,763, or the 50.0% retracement level. As long as the Gold price trades below that latter barrier and the distant 200-period SMA, rallies are exposed to selling on strength. On the downside, initial support is seen around the recent $4,600 swing area, with a break lower exposing the 23.6% Fibo. The retracement level is the $4,416 as the next bearish target, where dip-buying interest could attempt to stabilize the previous metal.
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