Gold recovers above $4,350 on US–Iran diplomacy hopes
- Gold price recovers to around $4,360 in Tuesday’s early Asian session.
- Trump said US officials had a “very good” meeting with Iranian envoys in New York.
- Expectations of interest rates staying higher for longer could exert some pressure on Gold.
Gold price (XAU/USD) rebounds to near $4,360 during the early Asian session on Wednesday. The precious metal edges higher amid hopes for diplomatic progress between the US and Iran.
CNBC reported on Tuesday that US President Donald Trump said that US officials had a “very good meeting” with Iran’s delegation and that it lasted about three hours. Meanwhile, Iran reportedly offered to reopen the Strait of Hormuz within seven days. However, the reports have not been independently verified by CNBC. Saudi Arabia is also reportedly planning to restart its East-West pipeline as early as this week.
On the other hand, a hawkish stance from the US Federal Reserve (Fed) could weigh on the yellow metal. The US central bank raised its policy rate by a quarter of a percentage point last week and flagged more hikes in the coming months.
St. Louis Fed President Alberto Musalem said on Monday that the Fed will likely need to hike rates further to lower inflation resulting from strong demand as well as a commodity price shock that has moved beyond oil, adding that it would be better for the Fed to act sooner than wait.
Higher interest rates typically weigh on gold because the precious metal does not pay interest, making yield-bearing assets relatively more attractive.
China demand cements its role as a key gold market driver
Analysts at Commerzbank highlight China’s outsized role in this year’s bullion market, noting that, according to data from the customs authority, the country "imported more than 1,000 tons of gold in the first eight months of the year, already exceeding last year’s total." They add that official sector activity has also intensified, with the Chinese central bank having "purchased a good 80 tons of gold between January and August, with purchases increasing noticeably in recent months and reaching their highest level in nearly three years in August." On this basis, Commerzbank concludes that "China is therefore a key driver of gold demand this year."
Technical Analysis: Gold is well-supported above the 100-day SMA
In the daily chart, XAU/USD holds above the 100-day simple moving average (SMA), keeping a constructive near-term tone while it nudges toward the Bollinger middle band, which acts as the first topside cap. The upper Bollinger band defines a higher resistance barrier, suggesting room for further gains if buyers can extend the rebound. The 14-day Relative Strength Index (RSI) around 50 points to neutral momentum, hinting that direction in the coming sessions will be driven primarily by how price reacts to these nearby band levels.
On the downside, immediate support emerges from the 100-day SMA at $4,315, with the lower Bollinger band near $4,215 reinforcing a deeper floor should corrective pressure intensify. On the topside, initial resistance is located at the Bollinger middle band around $4,390, followed by the more distant upper band near $4,565. A sustained break above the middle band would open the way toward the $4,565 area, whereas a failure to hold the 100-day SMA would signal that the current bullish bias is fading and expose the lower band zone.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.