Gold extends recovery as Oil prices pull back on US-Iran ceasefire hopes

Gold recovers for a second straight day, as softer Oil prices reduce pressure on global inflation expectations.
Diplomatic efforts between the US and Iran offer cautious optimism, encouraging short-term buying.
Technically, XAU/USD recovers from the 200-day SMA, with prices now approaching key resistance near the 100-day SMA.

Gold (XAU/USD) extends its recovery on Wednesday after falling to four-month lows earlier this week, as early buyers step in following a sharp selloff. The rebound comes as cautious optimism around diplomatic efforts in the ongoing US-Iran conflict has helped cool the surge in Oil prices, reducing immediate inflation concerns.

At the time of writing, XAU/USD is trading around $4,553, up nearly 1.85% on the day, marking its second straight day of gains after nine consecutive days of losses.

US ceasefire proposal in focus, Iran pushes back

On Tuesday, Israel’s Channel 12 reported that the United States had proposed a one-month ceasefire for negotiations, as Washington had sent Iran a 15-point plan aimed at ending the conflict.

Meanwhile, mediators from Turkey, Egypt, and Pakistan are pushing for a meeting between US and Iranian officials, with Axios reporting that high-level peace talks could take place as soon as Thursday, citing sources familiar with the discussions.

The proposal reportedly includes conditions such as limits on Iran’s nuclear program and keeping the Strait of Hormuz open in exchange for sanctions relief.

However, Iran downplayed the plan, with a top military spokesperson saying the US is “negotiating with itself,” adding that “someone like us will never come to terms with someone like you,” according to a video shared by the state-run Fars News Agency, which also reported, citing a source, that Iran will not accept a ceasefire or enter into the process with a party that has violated its agreements.

Oil cools from highs, but stays elevated

These mixed signals keep the broader outlook far from stable. Still, the recent drop in Oil prices is helping ease global inflation pressures, suggesting that central banks may not need to raise interest rates, which is supporting the non-yielding metal.

While Oil prices have pulled back from their recent peaks and are now fluctuating near recent lows, they remain elevated compared to pre-conflict levels, keeping investors cautious about underlying inflation pressure.

West Texas Intermediate (WTI) is trading around $87.37, after a sharp pullback from near $100 earlier this week.

Unless a meaningful breakthrough in US-Iran negotiations leads to a sustained decline in Oil prices, the upside in Gold is likely to remain capped. At the same time, a firm US Dollar USD) and elevated Treasury yields are acting as an additional headwind.

In the near term, Gold is expected to remain volatile as markets continue to react to shifting geopolitical headlines, energy price moves, and evolving expectations around global interest rates.

Technical analysis: XAU/USD tests 100-day SMA resistance after oversold bounce

From a technical perspective, XAU/USD’s near-term tone appears constructive after bouncing off the 200-day Simple Moving Average (SMA), with prices now approaching the 100-day SMA, which is acting as immediate resistance.

Momentum indicators on the daily chart suggest that downside pressure is easing but not fully reversed. The Relative Strength Index (RSI) has rebounded from oversold levels below 30 to around 37, indicating a modest recovery in momentum while still reflecting underlying selling pressure.

Meanwhile, the Moving Average Convergence Divergence (MACD) remains below its signal line and under the zero line. Although negative momentum is starting to contract, the broader bias continues to favor sellers.

On the upside, a sustained break above the 100-day SMA near $4,619 could open the door toward the 50-day SMA around $4,968, which aligns closely with the $5,000 psychological level and is likely to cap further gains.

On the downside, immediate support is seen at Tuesday’s low near $4,306, followed by the 200-day SMA around $4,107.