Gold Hesitant, USD and Fed Hawkishness Hold Back XAU/USD
Gold started the week with mixed results after US-Iran peace talks ended without an agreement. This sentiment briefly supported the strengthening of the US dollar, limiting gold's upside.
In Monday's Asian session, XAU/USD briefly fell to a four-day low of US$4,633–US$4,632, before rebounding and partially closing the weekly bearish gap. Support came as the possibility of further diplomacy was still considered open, preventing the dollar from continuing its aggressive daily rally.
According to a Wall Street Journal report citing relevant officials, regional countries are working to bring the US and Iran back to the negotiating table within days. This factor has kept the market from pushing for a full-blown escalation scenario, which typically increases demand for safe-haven assets more quickly.
However, tensions remain high. US Vice President JD Vance said the US had made a "last and best" offer but rejected Iran's, while Iranian state media deemed US demands excessive. US President Donald Trump also announced that the US Navy would begin a blockade of the Strait of Hormuz, amid a fragile two-week ceasefire and the ongoing Israeli conflict in Lebanon.
From a fundamental perspective, the shift in oil prices has also shifted interest rate expectations. WTI has returned to around US$105 per barrel, fueling inflation concerns and reinforcing bets that central banks, including the Fed, could signal a more hawkish stance. Because gold offers no yield, expectations of higher interest rates typically act as a drag on XAU/USD through rising yields and supporting the dollar.
Going forward, gold's direction will be determined by a combination of two major trends: geopolitical risks that can maintain safe-haven demand, versus a boost to the dollar and yields if markets become increasingly convinced the Fed will hold interest rates high for longer. As long as oil prices are high and inflation data dampen expectations of interest rate cuts, XAU/USD gains tend to be more severe and vulnerable to a rebound when the dollar strengthens. (asd)
Source: Newsmaker.id
