Gold (XAU/USD) extended its losses on Monday, falling below the $4,100 mark amid heightened risk-off sentiment triggered by escalating hostilities between the United States and Iran [1]. Tehran announced the closure of the key Strait of Hormuz, which pushed oil prices higher and increased pressure on global central banks to consider further interest rate hikes, thereby boosting treasury yields and weighing on gold, a yieldless asset [1]. Despite these developments, technical indicators such as the daily RSI and MACD suggest that bearish momentum in gold may be fading, with a bullish divergence emerging and the MACD turning positive [1]. Key resistance levels for gold are identified at $4,150 and $4,200, with further upside targets at $4,380 and $4,600, while support is clustered between $4,020 and $3,885, and a deeper level at $3,835 [1].
The US Dollar (USD) failed to capitalize on the risk-averse environment, with the USD Index (DXY) nursing mild losses and trading 0.1% lower at around 100.85 during late European trade [1][2]. The USD was the strongest against the Japanese Yen but the weakest against the New Zealand Dollar, according to percentage change tables provided in both sources [1][2]. The British Pound (GBP) recovered early losses and stabilized near 1.3400 against the USD, as the US Dollar surrendered its opening gains amid hopes that the US-Iran hostilities would not be prolonged [2].
Diplomatic efforts to mediate the US-Iran conflict are ongoing, with a spokesperson from the Iranian Foreign Ministry confirming that Qatar, Oman, and Pakistan are continuing their mediation attempts, while also accusing Washington of violating memorandum of understanding terms [2]. Meanwhile, reports from Iran's Mehr News Agency indicated several explosions near Bandar Abbas and Qeshm island, though these have not been confirmed by major media outlets [2].
Looking ahead, market participants are awaiting the release of the US Consumer Price Index (CPI) report scheduled for Tuesday and the testimony of Federal Reserve Chairman Kevin Warsh to Congress, which are expected to provide further clarity on the outlook for US interest rates [1][2]. Additionally, the United Kingdom's monthly Gross Domestic Product (GDP) data for May is due on Thursday, which could impact GBP/USD trading [2].
CONCLUSION
Gold prices have come under pressure due to escalating US-Iran tensions and the closure of the Strait of Hormuz, but technical signals suggest bearish momentum may be waning. Despite the risk-off mood, the US Dollar weakened, allowing GBP/USD to recover. Investors are now focused on upcoming US CPI data and Fed testimony for further direction.