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- Gold prices retreat despite concerns surrounding the US strikes on Irananian nuclear facilities over the weekend.
- Iran threatens to close the Strait of Hormuz, stoking inflation fears, Oil prices recover.
- XAU/USD fails to extend gains despite rising geopolititical risks.
Gold (XAU/USD) is trading in a tight range on Monday after the United States (US) carried out coordinated strikes on Iran’s nuclear infrastructure over the weekend.
US President Donald Trump confirmed that American forces bombed three of Iran’s key nuclear facilities – Fordow, Natanz and Isfahan on Saturday night.
In a televised address from the White House Briefing Room, Trump described the mission as “a very successful attack,” warning that “there are many other targets” if Iran does not seek peace.
At the time of writing, Gold is trading below $3,370 with intraday losses of 0.15%. Traders remain focused on developments in Tehran and the status of global Oil supply routes, particularly the Strait of Hormuz.
Geopolitical risks surge, boosting Gold’s safe-haven flows
The US coordinated strikes on Iran, dubbed Operation Midnight Hammer, involved B-2 Spirit bombers and Tomahawk missiles from US submarines. Iranian Foreign Minister Abbas Araghchi called the attacks “a heinous crime” in a state broadcast interview, warning of “everlasting consequences.” His remarks were later confirmed and quoted by Reuters on Sunday.
Iran’s parliament approved a motion to close the Strait of Hormuz — an Oil transit chokepoint for nearly 20% of global supply. The final decision now lies with the Supreme National Security Council. Oil prices spiked in response, adding to inflation risks and supporting safe-haven flows into Gold.
Gold daily digest market movers: Strait of Hormuz, inflation at risk
- Speaking during an emergency session of the United Nations (UN) Security Council on Sunday, China’s Ambassador to the UN, Fu Cong, criticized the US strikes on Iran’s nuclear sites as “a serious breach of sovereignty”, and warned of “potential consequences for regional stability.” He urged both the US and its allies to show restraint and emphasized that “force cannot resolve the issue.” His remarks were reported by Reuters and Chinese state media, which echoed Beijing’s call for diplomatic solutions and non-interference in Iran’s domestic affairs.
- Israeli Prime Minister Benjamin Netanyahu labeled the strikes “historic,” while UN Secretary-General António Guterres described them as a “dangerous escalation,” urging restraint. These comments were published across Reuters and major international outlets on Sunday.
- The mission to destroy Iran’s nuclear program was described by Trump as a “spectacular military success,” claiming Iran’s enrichment infrastructure was “completely and totally obliterated.”
- Iranian lawmaker and Revolutionary Guards commander Esmail Kosari told Press TV that parliament had “come to the conclusion we should close the Strait of Hormuz.” Kosari added that “the final decision is the responsibility of the Supreme National Security Council” and will be enacted “whenever necessary.” His remarks were echoed in a separate interview with the Young Journalist Club and widely reported by Reuters. The Strait remains critical for global energy flows, handling nearly 20% of daily Oil exports.
- Geopolitical tensions bolster Gold’s safe-haven appeal. The threat of retaliation from Iran and potential energy disruptions have fueled investor demand for Gold, even as prices consolidate below the $3,400 level. Uncertainty surrounding the security of maritime routes and the broader Middle East outlook continues to support risk-off positioning.
- The possibility of a prolonged conflict and a spike in energy prices has renewed concern over inflation risks, particularly if the Strait closure materializes. Rising Oil prices could pressure input costs and delay central bank rate-cut plans globally, especially in the US.
- Federal Reserve (Fed) Chair Jerome Powell is scheduled to deliver his semi-annual monetary policy testimony to Congress on Tuesday and Wednesday. Markets are watching for any indication that the Fed is shifting away from its “higher-for-longer” stance, although officials have stressed the need for more concrete disinflation before easing policy.
- Global equities are trading mixed, with US stock index futures little changed in the European morning. Traders remain on edge amid limited visibility on Iran’s next move and ahead of key macroeconomic commentary from both the Federal Reserve (Fed) and the European Central Bank (ECB) this week.
Gold technical analysis: XAU/USD muted below $3,400
Gold (XAU/USD) remains capped near $3,370 at the time of writing, with the $3,400 zone acting as a major psychological barrier for the next big move.
Immediate support lies at $3,342, aligned with the 23.6% Fibonacci retracement from the February 28 low to the April 22 high.
Dynamic support levels include the 20-day Simple Moving Average (SMA) at $3,352 and the 50-day SMA near $3,321.
Gold (XAU/USD) daily chart
A break below $3,342 and the moving averages could open the path toward $3,245, which corresponds to the 38.2% Fibonacci retracement level.
Conversely, a daily close above $3,400 would signal bullish momentum, potentially retargeting the June high of $3,452 and the all-time high of $3,500.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
