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Today, Friday, gold (XAU/USD) continues to rise steadily, breaking above the key 200-day simple moving average (SMA) and the $4,550 level, thereby reaching a new high since early June. Traders have scaled back expectations of an imminent Federal Reserve (Fed) rate hike after new U.S. inflation data released last week signaled easing price pressures. This is keeping the U.S. dollar near low levels, close to the three-month low recorded on Thursday, providing important support for gold as a non-yielding asset.
Nevertheless, investors remain concerned about inflationary risks associated with rising oil prices, exacerbated by the confrontation between the United States and Iran over the Strait of Hormuz. The Iran-backed Yemeni Houthi group reported attacks on eight oil tankers since the maritime blockade of Saudi vessels was introduced in late July, increasing the risk of a broader regional conflict and pushing oil prices to a three-week high. This factor largely overshadows the U.S. Treasury's plans to double the volume of certain long-term bond buyback operations and is supporting elevated yields on U.S. debt instruments.
CME Group's FedWatch Tool also confirms that investors are pricing in an approximately 68% probability of at least one rate hike by the U.S. central bank by the end of the year. This, together with continued geopolitical uncertainty, may help limit a deeper decline in the dollar and discourage bulls from opening positions in favor of further gains in the precious metal.
In the latest developments related to the Middle East crisis, President Donald Trump said on Wednesday that the United States would launch the "most devastating economic operation" against Iran, threatening strict sanctions against any country that helps Tehran circumvent existing measures or conducts business with it. Vice President JD Vance added that economic pressure is the most effective means of confronting Iran. This creates a geopolitical risk premium and confirms the potential for increased demand for the U.S. dollar at lower levels, which, in turn, may limit further gains in gold prices.
From a technical perspective, XAU/USD appears to have consolidated firmly above the 200-day moving average, and the bulls are now looking for a breakout above $4,600. The oscillators are positive, confirming the bulls' advantage in the market, but the Relative Strength Index (RSI) is close to overbought territory, warning of possible consolidation or a pullback. Support is found at $4,535 and $4,500, where the 200-day SMA is located. A decline below this level would weaken the bulls' position. Nevertheless, the path of least resistance remains to the upside.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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