Gold Sideways Ahead of Iran Deadline!
Gold (XAU/USD) continued its consolidation for the second consecutive day in the Asian session on Tuesday (April 7th). At the time of writing, gold prices were trading around $4,654, moving within a relatively wide range. Although volatility has not yet exploded, the short-term bias is considered to be leaning towards weakness as market participants re-add US dollar positions ahead of President Donald Trump's deadline regarding Iran.
Demand for the dollar strengthened as hopes for a last-minute US-Iran deal faded ahead of Tuesday night's deadline for reopening the Strait of Hormuz. Geopolitical uncertainty has re-established the dollar's safe-haven status, a barrier for gold, especially as investors seek liquidity amid headline risk.
On the other hand, expectations of a more hawkish global monetary policy are weighing on the non-yielding precious metal. Markets believe that surging energy costs due to the war could potentially revive inflationary pressures, giving major central banks—including the Federal Reserve—a reason to maintain high interest rates for longer.
Crude oil prices also rallied to a four-week high after Trump escalated his rhetoric against Iran and threatened attacks on civilian infrastructure if the deadline passed without a deal. Iran's harsh statements, including warnings that they would not back down, increased the risk of escalation and maintained a geopolitical premium in energy markets.
Data-wise, the ISM reported that the US Services PMI fell to 54 in March from 56.1, indicating weakening service sector momentum. However, inflationary pressures in the report actually increased, with the Prices Paid index rising to 70.7 from 63, reinforcing concerns that inflation remains subdued despite slowing activity.
The combination of sticky inflation data and signs of a resilient labor market increases the likelihood that the Fed will maintain its tighter policy stance for longer, which in turn supports the dollar and pressures gold. Market participants are now awaiting the release of the next US macro data to test whether gold's consolidation breaks, or if dollar and interest rate pressures push XAU/USD lower again.
5 Key Points:
- Gold traded sideways for two days in Asia, but the short-term bias is tilted to the downside.
- The US dollar strengthened as a safe haven ahead of Trump's deadline on Iran and the Strait of Hormuz.
- Expectations of more hawkish central banks weighed on gold, as the precious metal has no yield.
- Oil strengthened on war rhetoric and the risk of escalation, heightening concerns about energy inflation.
- The ISM Services PMI fell to 54, but Prices Paid rose to 70.7, reinforcing the narrative of higher interest rates for longer. (asd)
Source: Newsmaker.id
