During the Asian trading session on Thursday, spot gold (XAU/USD) held above $4100, appearing to have halted the previous day's minor pullback from a two-week peak and was currently trading around $4122.45 per ounce.
Rising tensions between the US and Iran have pushed crude oil prices to their highest level since June 11th, sparking inflation concerns and strengthening expectations for Federal Reserve interest rate hikes. This, in turn, has driven US Treasury yields to multi-month highs, presenting a significant headwind for non-yielding gold.
For the 12th consecutive night, the US and Iran have exchanged strikes, while the Houthi forces in Yemen, allied with Iran, have opened a new front in the conflict by announcing a blockade of a key Red Sea shipping route, which accounts for approximately 7% of global oil supply. Combined with a significant drop in shipping traffic through the Strait of Hormuz, this has intensified fears of supply disruptions, extending oil's upward trend this month. Investors are concerned that rising energy costs could reignite inflationary pressures, forcing central banks to adopt a more hawkish stance.
According to the CME Group's FedWatch Tool, traders are currently pricing in a probability exceeding 90% for a Federal Reserve rate hike by the end of this year. This outlook continues to support higher US Treasury yields, with the benchmark 10-year yield holding steady near two-month highs. However, persistent US dollar weakness is providing some support for the gold price and limiting its downside. Therefore, before confirming the end of the weekly uptrend, it is prudent to await strong follow-through selling.
Analysts at Deutsche Bank noted that the move in rates is accompanied by a significant shift in policy expectations, with investors now having "priced in a more hawkish Fed path, with 34 basis points of hikes priced before the December meeting, which was adjusted 2.3 basis points higher on the day." They stated that this repricing has helped reinforce the recent rise in US real yields and the broader sell-off across the Treasury yield curve.
Traders are now focused on upcoming US weekly jobless claims data, which may provide some momentum early in the North American session. Additionally, the highly anticipated European Central Bank meeting could inject volatility into financial markets. Beyond these factors, further developments in the Middle East crisis will also present short-term trading opportunities for gold.
From a 4-hour chart perspective, gold needs to break through the $4155-$4165 range to gain support for further upward movement.
On Wednesday, the weekly uptrend stalled near the $4155-$4165 area, a zone formed by the confluence of the 200-period Exponential Moving Average on the 4-hour chart and the 23.6% Fibonacci retracement level of the April-June decline. With momentum indicators still constructive, this area should now serve as a key pivot point for short-term traders. The Relative Strength Index is hovering around 62, and the MACD remains in positive territory, indicating buyers retain some control but are capped by selling pressure above.
This implies that gold first needs to clear the aforementioned dense resistance zone to justify further appreciation. A sustained break above would open the path towards the 23.6% Fibonacci level at $4165 and the more congested resistance near the 38.2% retracement level around $4302. On the downside, initial support is seen around the $4100 level and near the 100-period EMA at $4083, with major structural support anchored at the Fibonacci pivot of $3943. A deeper correction could attract buying interest at this level, potentially attempting to rebuild a more stable base for gold.