Gold (XAU/USD) extends its intraday descent below the $4,800 mark and drops to a fresh daily low heading into the European session on Tuesday, reversing a major part of the previous day's bounce from a one-week low. Investors remain skeptical about a potential US-Iran agreement amid the standoff over the Strait of Hormuz. The US Navy seized an Iranian-flagged cargo ship in the Gulf of Oman as part of its blockade. In response, Iran once again closed the strategic waterway, which acts as a tailwind for Crude Oil prices. This, in turn, revives inflationary concerns and offers some support to the US Dollar (USD), exerting pressure on the commodity.
Any meaningful USD appreciation, however, seems elusive in the wake of diminishing odds for a rate hike by the US Federal Reserve (Fed). Instead, the CME Group's FedWatch Tool indicates that there is a roughly 45-50% chance of a Fed rate cut by the year-end, which should keep a lid on the USD and continue to act as a tailwind for the non-yielding Gold. Traders might also refrain from placing aggressive directional bets amid continuing uncertainty over whether talks to end the US-Iran war will take place. Hence, it will be prudent to wait for strong follow-through selling before positioning for any further downfall for the XAU/USD pair.
US President Donald Trump announced that US negotiators will travel to Pakistan for another round of negotiations with Iran, aiming to extend a fragile ceasefire that is set to expire on Wednesday. Iranian officials, on the other hand, are hesitant about further peace talks, citing the US blockade. In fact, Iranian Parliament speaker Mohammad Bagher Ghalibaf said that Iran will not accept negotiations while under threat. Moreover, Iran's Foreign Minister Abbas Araghchi said that continued violations of the ceasefire by the US are a major obstacle to continuing the diplomatic process. Reports, however, suggest that an Iranian delegation will travel to Islamabad for negotiations.
Hence, the market focus will remain glued to incoming headlines surrounding the US-Iran saga, which might continue to infuse volatility in the financial markets. Apart from this, trades on Tuesday will take cues from Fed Chairman-designate Kevin Warsh's testimony to grab some meaningful opportunities around the Gold price. Nevertheless, the aforementioned mixed fundamental backdrop warrants some caution before placing aggressive directional bets around the XAU/USD pair.
XAU/USD 4-hour chart
Gold could attract dip-buyers at lower level amid bullish setup
The precious metal holds a constructive near-term bias as it sits above the 200-period Exponential Moving Average (EMA) at $4,784.25. The 50.0% retracement level of the March downfall, at $4,762.13, adds a secondary layer of underlying demand beneath the EMA. Meanwhile, momentum gauges remain subdued rather than directional, with the Relative Strength Index (RSI) hovering near a neutral 51, and the Moving Average Convergence Divergence (MACD) indicator is marginally negative. This hints that bulls retain structural control but lack strong follow-through for now.
In the meantime, immediate support is seen at the 200-period EMA at $4,784.25 and then the 50.0% retracement at $4,762.13. A sustained break below this cluster would expose deeper Fibonacci supports at $4,607.05 and $4,415.17 ahead of the broader swing low region near $4,105.01. On the topside, initial resistance emerges at the 61.8% Fibo. retracement at $4,917.21, with further hurdles at the 78.6% level at $5,138.01 and the cycle high region at $5,419.25, where any rejection would likely cap the current bullish phase.
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