Gold Out of Favour: All Eyes on Inflation Risks

Gold prices fell to 4,300 USD per ounce on Tuesday, with quotes remaining under pressure amid the escalating Middle East conflict. Iran has denied reports of any talks with the US, stating that no such contacts have occurred.

Tehran dismissed Donald Trump's statements as an attempt to influence financial markets and has continued its attacks on American targets. Israel, meanwhile, continues to strike Iranian territory.

Gold saw a brief recovery earlier after Trump postponed potential strikes on Iran's energy infrastructure and announced that negotiations had allegedly begun. However, the prospects for resolving the conflict and reopening the Strait of Hormuz remain uncertain, keeping inflation risks elevated.

Since its March peak, gold has lost up to 25% amid rising energy prices. The rally in commodity prices has reinforced expectations of tighter monetary policy, weighing on the non-yielding asset.

Technical Analysis

On the H4 XAU/USD chart, the market is forming a consolidation range around the 4,383 USD level. An upside breakout would open the path for a correction towards 4,850 USD, while a downside breakout could see the downward wave extend to 4,272 USD. The MACD indicator confirms the current momentum, with its signal line below the centre line but pointing sharply upwards.

On the H1 chart, the market broke above the 4,300 USD level and completed a wave to 4,414 USD. Looking ahead, a corrective move back to 4,308 USD is likely, followed by an anticipated rise to 4,505 USD. The Stochastic oscillator supports this scenario, with its signal line remaining above the 20 level and showing potential to rise towards 80.

Conclusion

Gold continues to fall out of favour as the market prioritises inflation risks driven by the protracted Middle East conflict. Despite brief moments of relief following headlines about potential negotiations, the underlying reality of sustained hostilities and uncertainty over the Strait of Hormuz keeps energy prices elevated, and monetary policy expectations tilted towards tighter conditions. Having lost a quarter of its value from its March highs, gold now faces a challenging environment in which concerns about rising rates repeatedly overshadow safe-haven demand. While technical indicators suggest a short-term bounce is likely, the broader trend remains firmly bearish.

By RoboForex Analytical Department

Disclaimer:

Any forecasts contained herein are based on the author's particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.