Gold prices failed to capitalise on the gap higher at the start of the week with the precious metal sliding and remaining under pressure since Monday, according to MarketPulse analyst Zain Vawda.
The analyst explained that XAUUSD has seen its safe-haven appeal overshadowed by the US dollar, as rate cut bets tumbled this week on fears over the Middle East conflict’s impact on inflation. As the week progressed it became clear that any hope of a swift resolution may not be forthcoming.
The closure or lack of movement through the Strait of Hormuz has kept crude oil prices elevated with analysts across the board running various scenarios the longer the Strait remains closed.
One of the more interesting scenarios was from Bloomberg Economics that predicted oil could hit around the $160/barrel mark if the Strait of Hormuz remains closed for three months. At one month, they have oil prices just over $100/b, with a 2-month closure seeing oil hit $140/b.
These concerns have seen rate cut bets slashed for the Federal Reserve from the +-66 bps prior to the conflict to 24 bps, per LSEG data.
This has weighed heavily on gold, together with some profit taking earlier in the week likely also sharing some of the blame.
The week ahead for gold
Gold will continue to be sensitive to the ever-changing rate cut data as the geopolitical situation in the Middle East evolves. Things change quickly and despite all the tough guy talk on both sides, a deal could materialise quickly, as we have seen in the past.
Such a move may have a major impact on overall sentiment and thus also impact gold prices.
Rate cut data could also see significant changes after the Fed meeting when we may hear for the first time what policymakers think of the Iran conflict and its implications. The Fed is currently in its blackout period and thus we no reactions on the Iran situation.
The December update had one rate cut penciled in for 2026. There is a clear risk it gets pushed back to 2027 in the current climate. Such a move could further weigh on gold prices and would strengthen the US dollar.
All other data releases will likely remain overshadowed by rate cut bets and geopolitical developments.
From a technical standpoint, Gold is currently exhibiting a bearish consolidation following a sharp correction from its early-month highs near $5,420/oz and last week’s highs at $5,238.
Gold is trading within a defined horizontal range (red box) between $5,050 and $5,200. A recent break below suggests increasing selling pressure, with price now testing the critical psychological level of $5,000.
The bias remains neutral-to-bearish while below $5,130. Conversely, buyers need a breakout above $5,200 to reclaim the bullish trend.
(Source: MarketPulse)
