Middle East Conflict Fuels Gold Demand Amid Uncertainty
The gold price (XAU/USD) has risen approximately 1% to around $4,450 during the European trading session on Friday. This increase occurs despite renewed geopolitical tensions in the Middle East, where statements from peace mediators have cast doubt on U.S. President Donald Trump’s claims that Iran requested a 10-day pause in planned military strikes against its energy infrastructure.
According to a report by the Wall Street Journal, mediators have refuted allegations that Iran sought the temporary halt in strikes. The situation remains unresolved as Iran has yet to provide a final response to Trump’s 15-point plan, which demands Tehran open the Strait of Hormuz and abandon its missile program. Analysts suggest the likelihood of Iranian agreement with these terms is minimal.
Further complicating de-escalation efforts, the U.S. military has deployed up to 10,000 additional ground troops in the region. These developments have intensified concerns over prolonged conflict, which could drive oil prices higher and indirectly support gold as a safe-haven asset.
Technical Analysis Highlights Key Support Levels
XAU/USD remains above its rising 200-day Exponential Moving Average (EMA) at $4,220, indicating an overall bullish trend. However, the price is currently trading below the mid-$4,000 level, with a weak Relative Strength Index (RSI) of 32 suggesting momentum is not yet strong.
Immediate resistance appears near the March 25 high at $4,600, followed by $4,820 as a key breakdown zone. A successful break above $4,820 could push prices toward $5,000. On the downside, the 200-day EMA serves as critical support, with additional resistance at the March 23 low of around $4,100.
Gold’s Role in Investment Strategies
Investors continue to view gold as a hedge against inflation and currency depreciation due to its lack of yield dependency. Central banks remain major buyers, adding 1,136 tonnes of gold valued at approximately $70 billion in 2022—a record high since records began.
Countries such as China, India, and Turkey have accelerated their gold reserves to diversify foreign exchange holdings. Gold also exhibits an inverse correlation with the U.S. Dollar and risk assets like equities, often rising when markets become volatile or interest rates decline.
Market Dynamics and Central Bank Policy
Rising oil prices linked to Middle East tensions have accelerated global inflation expectations, prompting hawkish monetary policy statements from central banks. These measures typically reduce the appeal of non-yielding assets like gold, creating a complex interplay between geopolitical risks and macroeconomic signals.
Gold’s price remains heavily influenced by U.S. Dollar movements, as it is priced in dollars. A stronger dollar tends to suppress gold prices, while a weaker dollar supports its value amid uncertainty.
