Gold extended its rebound early Tuesday, rising toward $4,777 in Asian trade as renewed U.S.-Iran diplomatic contacts and uncertainty over future Federal Reserve policy pressured the U.S. dollar. The move higher slowed, however, amid escalating tensions in the Strait of Hormuz and a newly confirmed U.S. naval blockade.
Diplomatic progress supports risk appetite, weighs on dollar
U.S. Vice President Vance said talks with Tehran had made “progress” even without a formal breakthrough, and suggested a broader framework agreement remained possible. Those comments brightened sentiment in risk assets and reduced demand for the dollar, providing support to dollar-priced commodities such as gold.
The U.S. Dollar Index has fallen 0.6% over the past week to 105.10, reflecting a market tilt toward the prospect of easier monetary policy rather than immediate safe-haven demand.
Inflation data and Fed expectations underpin gold
Friday’s data showed U.S. consumer inflation in March rising at its fastest pace in almost four years, driven largely by higher energy prices tied to conflict in the Middle East. With inflation running at a 3.5% annual rate and the dollar softening, conditions are historically favorable for assets with finite supply that are viewed as stores of value.
Interest-rate markets now imply roughly a 30% chance of a 25-basis-point Fed rate cut by December. Lower expected yields reduce the appeal of holding dollars and interest-bearing assets, improving the relative attractiveness of non-yielding assets such as gold. Benchmark 10-year U.S. Treasury yields have eased to 4.52% from recent highs, reinforcing that trend.
Geopolitical tensions cap gains
Despite the supportive macro backdrop, gold’s upside is constrained by rising geopolitical risk. U.S. President Trump confirmed a naval blockade in the Strait of Hormuz and threatened action against Iranian vessels. Tehran responded with warnings targeting ports in the Persian Gulf and Gulf of Oman.
This mix of tentative diplomacy and hardened military posture has left markets on edge. Expectations of de-escalation, which weigh on the dollar, are being offset by the risk of open conflict, which can trigger demand for cash and short-term government debt. The result is a cautious stance among traders and reduced appetite for aggressive dollar selling.
Technical picture: key resistance near $4,855
From a technical standpoint, gold remains below its 200-period simple moving average (SMA) at $4,854.58, a key resistance level.
- The Relative Strength Index (RSI) is hovering near 57, indicating easing downside pressure but not yet a confirmed trend reversal.
- A contracting MACD histogram also points to reduced bearish momentum without signaling a clear bullish breakout.
Key levels on the chart:
- Resistance:
- $4,855: aligned with the 200-period SMA
- $4,913: near the 61.8% Fibonacci retracement
- Above $4,913, potential extensions come into view at $5,133 and $5,413 if momentum accelerates
- Support:
- $4,759: initial support in the current range
- Below that, $4,604 and $4,413 are the next key floors
- A decisive break under these levels would expose the structural base around $4,104
Market implications and sentiment gauge
The price behavior of gold in the coming weeks is likely to serve as a proxy for broader sentiment toward non-sovereign assets.
- A clear and sustained break above $4,855 would suggest that traders are prioritizing inflation hedging and longer-term currency debasement concerns over short-term geopolitical risk.
- A sustained move below $4,759, especially if tied to an escalation in the Strait of Hormuz, would point to a wider de-risking phase, with capital rotating into cash and short-duration government bonds and creating headwinds for most other asset classes.
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