FX.co ★ XAU/USD, GOLD

Even though the US dollar (USD) and oil prices are trading lower on Wednesday, gold (XAU/USD) struggles to draw buying interest as markets continue to be cautiously optimistic that the US and Iran could eventually come to an agreement to end the Middle East conflict. As of this writing, XAU/USD is at its lowest point since March 30, trading at about $4,430. After Iran's state TV revealed that Washington and Tehran had drafted a preliminary unofficial framework for a memorandum of agreement (MOU), market mood strengthened. In accordance with the suggested framework, Iran would return commercial transit through the Strait of Hormuz to pre-war levels within a month, and US military forces would leave Iran and relieve the naval blockade. However, as traders increasingly see oil-driven inflation as the greater short-term danger, gold is finding it difficult to profit from the better attitude. Expectations that the Federal Reserve (Fed) and other major central banks may need to continue restrictive monetary policy for an extended period of time have increased due to rising energy prices. Expectations of a hawkish Fed are further supported by the US macroeconomic environment, which continues to show robust growth and sticky inflation. While the price is still capped below the 20-period Simple Moving Average (SMA) at $4,594, the daily chart shows XAU/USD hovering just above the lower Bollinger Band, which is close to $4,422. This keeps the overall tone fragile. While the Average Directional Index (ADX) near 22 indicates a growing but not yet strong trend, the Relative Strength Index (RSI) holds near 37, indicating weak but not extreme downside momentum. The 20-period SMA at $4,594 is the first point of resistance on the upside, ahead of the upper band at $4,767. The lower Bollinger Band at $4,422 serves as immediate support on the downside. This is followed by a horizontal floor at $4,350 and a deeper level at $4,100, where a break would probably strengthen the current bearish bias.