GOLD bulls lack conviction amid renewed US-Iran tensions

• Gold kicks off the week on a negative note, struggling around $4,700 early Monday.
• The US Dollar rebounds on renewed US-Iran tensions-led Oil price surge and inflation fears.  
• Gold bulls lack conviction after the falling wedge breakout, while below the $4,775 confluence resistance.

Gold is struggling to extend the previous week’s uptrend, holding close to the $4,700 level early Monday, as a new week begins, but fresh US-Iran tensions arise and erode investors’ confidence once again.

With no end in sight to the Iran war, Oil prices see a fresh leg higher, reviving inflation fears and boosting the US Dollar’s (USD) safe-haven appeal while boding ill for the USD-denominated Gold.

Rekindling of inflation risks bolsters expectations that the US Federal Reserve (Fed) could hold interest rates higher for longer or could even opt for a rate hike by the turn of this year. This narrative also serves positive for the Greenback at the expense of non-yielding assets such as Gold.

Over the weekend, Iran passed on the counter-proposal to Washington through Pakistani mediators. However, US President Donald Trump took no time to reject the Iranian response to the US peace proposal, citing it as “totally unacceptable”.The US rejection of the Iranian counter-proposal puts strain on an already fragile ceasefire, as the United Arab Emirates (UAE) and Kuwait reported drone incursions in their airspace on Sunday, and a drone attack started a small fire on a ship on the coast of Qatar.

The unresolved standoff hangs over the high-stakes summit between Trump and Chinese this week (May 13 to May 15).

Furthermore, the blockbuster April Nonfarm Payrolls report from the United States (US) boosts hawkish Fed expectations, adding to the weight on the bullion. Data on Friday showed that the headline NFP increased 115,000 in April, above expectations for a 62,000 gain.

Meanwhile, hotter-than-expected Chinese inflation data fail to inspire Gold bulls amid muted Indian demand and steady Chinese premiums for the yellow metal last week.

Looking ahead, Gold will likely see limited upside as traders would move to the sidelines and refrain from taking fresh bets ahead of Tuesday’s US Consumer Price Index (CPI) inflation data.

Also, markets keep a close eye on the developments in the Mideast and on the Oil price action for fresh trading impetus in Gold price.

Daily technical analysis

In the daily chart, XAU/USD trades at $4,686.36, holding a capped tone as it sits under a dense band of daily moving averages. Price is marginally below the 21-day simple moving average (SMA) at $4,694.99 and remains clearly under the 50-day SMA at $4,768.70 and the 100-day SMA at $4,781.58, which collectively suggest that recent rebounds are still unfolding within a broader corrective phase. The Relative Strength Index (RSI) around 50 points to neutral momentum, hinting at consolidation rather than a clean bullish reversal while these overhead levels continue to weigh.

On the topside, initial resistance is seen at the 21-day SMA near $4,695, with further barriers at the 50-day SMA around $4,769 and the 100-day SMA near $4,782, where a break would be needed to ease the current downside bias and open room for a more durable recovery. On the downside, the broken descending trend-line area, referenced by the prior break price around $4,556, acts as the first notable support ahead of the more substantial 200-day SMA near $4,321, where buyers would be expected to defend the broader bullish structure if a deeper pullback unfolds.