Gold rises 1% as US-Iran deal expectations strain Oil and Dollar
Gold rebounds from its recent declines as market participants respond to new developments regarding US-Iran negotiations. WTI crude experiences a decline exceeding 5%, while the US Dollar Index moves closer to the 99.00 threshold. Technically, XAU/USD remains confined within a broad range, maintaining its position above the 200-day SMA near $4,380. Gold rebounds sharply on Monday as hopes for a US-Iran deal to end the war in the Middle East and reopen the Strait of Hormuz weigh on the US Dollar and Oil prices. Optimism regarding a potential breakthrough in negotiations has heightened following US President Donald Trump’s assertion that discussions with Iran are advancing in a “orderly and constructive manner. A potential deal reportedly encompasses a 60-day ceasefire extension, the reopening of the Strait of Hormuz, and the lifting of the US naval blockade on Iranian ports, with ongoing negotiations regarding Iran’s nuclear program. It was also reported that Iran’s Foreign Ministry spokesman Esmaeil Baghaei indicated that advancements had been achieved on a “large portion” of the discussions facilitated by Pakistan-mediated negotiations.
However, he emphasised that a final agreement was not yet on the horizon. Trump also stated that there was “no rush” to finalise a deal. Meanwhile, a report on Monday indicated that negotiations continue to encounter obstacles due to disagreements related to Iran’s nuclear program and sanctions relief. The latest headlines trigger a sharp decline in crude oil prices on Monday, with West Texas Intermediate down more than 5% at the time of writing. Meanwhile, the US Dollar Index, which tracks the Greenback’s value against a basket of six major currencies, retreats toward the 99.00 mark. For Gold, a successful agreement could significantly alter the recent macro narrative that has pressured bullion since the start of the war, as rising Oil prices fuelled inflation concerns and reinforced expectations that major central banks may need to raise borrowing costs. A higher interest rate environment typically serves as a headwind for non-yielding assets such as Gold.
Markets are pricing in a nearly 40% chance of a 25 basis point hike at the Fed’s December meeting, per CME FedWatch data. If a deal is struck and the Strait of Hormuz reopens, falling oil prices could alleviate concerns about energy-driven inflation, possibly reducing expectations for another Fed interest rate hike. Until negotiations clarify, Gold’s potential may stay constrained, largely influenced by the US Dollar, Oil prices, and changing interest rate expectations. Central bank purchases and strong investment demand are key long-term supports for bullion, helping to mitigate significant downside risks. Looking ahead, investors will closely monitor additional developments regarding the US-Iran negotiations for new guidance. This week, attention will turn to the US Personal Consumption Expenditure inflation report on Thursday and speeches from various Fed officials for insights on the interest rate outlook.
XAU/USD stays above the 200-day SMA around $4,381, maintaining a positive outlook, but is restricted by the 100-day SMA near $4,800, which curbs short-term gains. The RSI at 44 on the daily chart indicates a slight negative trend, while the MACD is below zero with a mildly negative histogram. This combination points to subdued momentum and a consolidative, range-bound bias between key moving averages. Initial support sits near the $4,500 floor, with a key 200-day SMA cluster just above $4,381, where dip-buying could return if bears gain momentum. A sustained break above the 100-day SMA at about $4,800 is essential to lift the current cap and pave the way to the psychological resistance around $5,000, where previous supply marks the next major hurdle for bulls.
