Gold (XAU/USD) edged higher on Monday, trading around $4,208 and up nearly 1.3% on the day, as traders responded to signs of progress in US-Iran negotiations held in Switzerland, with Pakistan and Qatar mediating the talks [1]. US Vice President JD Vance stated that negotiators had laid 'a very good foundation for a successful final deal' and confirmed that the Strait of Hormuz remains open [1]. Qatar and Pakistan announced that Washington and Tehran had agreed on a roadmap to reach a final deal within 60 days and would continue technical-level talks throughout the week [1].
Despite the positive developments in the Middle East, which have pushed oil prices back toward pre-war levels and eased concerns over a prolonged energy-driven inflation shock, traders remain cautious about pushing gold prices higher. This hesitancy is attributed to hawkish expectations from the Federal Reserve, which continue to act as a headwind for the precious metal [1]. The recent surge in energy costs has already fueled inflation in the United States, prompting Fed officials to adopt a more hawkish stance at last week's monetary policy meeting [1].
Market participants are currently pricing in a 73% chance of a rate hike in September, according to the CME FedWatch Tool [1]. Expectations that US interest rates will remain higher for longer are supporting the US Dollar near recent highs and pushing US Treasury yields higher, with the yield on the 2-year Treasury note climbing to 4.23% on Monday, its highest level since February 2025 [1].
Technical analysis indicates that XAU/USD maintains a bearish near-term bias, holding below the 200-day Simple Moving Average (SMA) at roughly $4,469. The Relative Strength Index (RSI) is around 40, suggesting weak momentum, while the MACD remains slightly negative, indicating that any rebounds are likely to face selling pressure [1]. Key resistance levels are at the 200-day SMA ($4,469) and the 100-day SMA ($4,714), while notable support is seen around $4,000 [1].
Looking ahead, the US Personal Consumption Expenditures (PCE) inflation report due later this week will be closely watched, as any surprises in the data could influence interest rate expectations and, in turn, gold prices [1].
CONCLUSION
Gold prices have risen on optimism surrounding US-Iran negotiations, but upside remains capped by expectations of further Fed rate hikes and a strong US Dollar. The market's focus now shifts to upcoming US inflation data, which could further influence gold's direction in the near term.