Gold has regained recovery momentum to retest $4,600 in Asian trades on Tuesday, after having defended the $4,400 level.
Gold set for a monthly fall amid hawkish Fed bets
The latest leg up in Gold is mainly driven by a return of risk appetite, which snaps the winning streak in the US Dollar (USD) against its major competitors.
The recovery in risk sentiment could be attributed to renewed optimism of de-escalation of the Middle East war after a Wall Street Journal (WSJ) report stated that US President Donald Trump told aides he is willing to end the US military campaign against Iran even if the Strait of Hormuz remains largely closed.
Additionally, the above forecasts Chinese official Manufacturing and Non-Manufacturing PMI data for March, despite the geopolitical tensions, help revive appetite for riskier assets, denting the appeal of the Greenback as a safe-haven asset.
Additionally, USD traders are looking to cash in on their recent long positions heading into the March quarter end, leading to profit-taking in the buck and lifting Gold price further north.
Gold also draws support from the latest comments by US Federal Reserve (Fed) Chairman Jerome Powell. During his public appearance on Monday, Powell signalled that long-term inflation expectations in the United States (US) remain under control, even as geopolitical tensions in West Asia continue to roil global markets.
Despite the recent recovery from four-month lows of $4,099, the bright metal is on track to book the worst month in over 17 years as the energy shock-driven higher inflation projections priced out a Fed interest rate cut this year. Gold thrives in a low-interest-rate environment.
In the day ahead, Gold could see further upside if the end-of-the-quarter flows pick up steam. However, markets continue to monitor developments in the Middle East war for fresh trading impetus in Gold.
“The fifth week of Trump’s war on Iran has confirmed the absence of any overarching strategy,“ the Guardian noted in an editorial on Tuesday.
Gold price technical analysis: Daily chart
The near-term bias is mildly bearish as price remains below the 100-day Simple Moving Average (SMA) near $4,637, while still defending the $4,400 level. This configuration shows short-term sellers pressing within a broader uptrend defined by the steadily advancing 100- and 200-day SMAs. The Relative Strength Index (RSI) at 40.90 stays below the 50 mark and away from oversold territory, indicating persistent but not exhausted bearish momentum.
Immediate resistance emerges at the 100-day SMA around $4,637, where a daily close above the latter would soften the bearish tone and open the way toward the $4,700 area. On the downside, initial support sits near the previous low at $4,420, ahead of the $4,350 demand area and the rising 200-day SMA around $4,129.
As long as price trades beneath the short-term averages and RSI holds below 50, rallies are vulnerable to selling into these resistance levels. Adding credence to the bearish outlook, the 21-day and 50-day SMAs Bear Cross confirmed on March 25 remains in play.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
