Middle East tensions continue to escalate, raising crude oil inflation concerns, as gold faces pressure at key resistance levels.

Huitong Finance APP News — XAU/USD maintained a slight intraday gain during Tuesday’s Asian session but failed to break through the $5,050 level, indicating a lack of bullish confidence. As the conflict between the US and Israel extends into southern Lebanon, with ground offensives against Hezbollah-controlled areas intensifying, geopolitical risk aversion continues to support gold prices.

Meanwhile, Iran has launched missile and drone attacks on civilian infrastructure in six Gulf countries, including airports, ports, oil facilities, and commercial centers. The Strait of Hormuz, a critical route accounting for about one-fifth of global oil supplies, remains under threat, keeping oil prices high. Elevated oil prices raise inflation concerns that may force the Federal Reserve to keep interest rates high or consider hikes, putting pressure on non-yielding assets like gold.

The US dollar, after a brief decline, is supported by hawkish expectations stemming from Middle East tensions, limiting the upside potential of XAU/USD. However, markets remain cautious ahead of the upcoming two-day FOMC meeting and policy updates from the European Central Bank, Bank of Japan, and Bank of England, with investors highly sensitive to future policy signals.

The daily chart shows that gold remains in a short-term weak consolidation zone, fluctuating between $5,000 and $5,050. On the 4-hour chart, XAU/USD has broken below the 200-period simple moving average (SMA) and remains below the 38.2% Fibonacci retracement of the February-March rally, indicating a bearish bias. The MACD is below zero with negative red bars continuing, and RSI is at 41, leaning toward weakness, suggesting sellers still hold the advantage. Initial resistance is around the 38.2% Fibonacci retracement at $5,040, followed by near the 200-period SMA at $5,063. A break above this zone could target the 23.6% retracement at $5,186. Support levels are first at the psychological $5,000 mark, then at recent lows between $4,995 and $4,985. If these are broken, the price could test the 50% retracement at $4,921.

Editor’s Summary

XAU/USD remains range-bound supported by geopolitical risks, but high oil prices and inflationary pressures, along with temporary dollar support, limit gold’s upside. In the short term, prices may consolidate between $5,000 and $5,050 while awaiting policy signals from the Federal Reserve and other major central banks. Medium-term, if the dollar weakens and oil risk premiums ease, gold could re-enter a bullish phase. Investors should monitor key technical levels and policy developments to seize trading opportunities.

Frequently Asked Questions (FAQ)

Q1: How does the current Middle East situation affect gold prices?

A1: The conflict increases concerns over oil supply and geopolitical risks, prompting safe-haven capital flows into gold. However, high oil prices may trigger inflation fears, leading the Fed to maintain or raise interest rates, which pressures non-yielding assets like gold, causing prices to fluctuate.

Q2: Why does XAU/USD remain weak in the short term?

A2: Gold failed to break above $5,050 and broke below the 200-period SMA and 38.2% Fibonacci retracement on the 4-hour chart. Negative MACD and weak RSI indicate bearish momentum, while the dollar’s short-term support further limits upside, leading to a consolidation phase.

Q3: How should investors prepare for the upcoming FOMC meeting?

A3: Markets are highly attentive to the Fed’s rate decision and Powell’s statements. Hawkish or steady rates will suppress gold’s gains; dovish signals or hints of rate cuts could trigger a rebound. Traders should wait for clear policy cues before acting.

Q4: What is the transmission logic between oil prices and gold?

A4: High oil prices boost inflation expectations, potentially prompting central banks to keep interest rates high, which pressures gold. Conversely, Middle East risks increase safe-haven demand, supporting gold purchases. The interaction of these factors causes gold to fluctuate.