Gold is still at risk as concerns over a potential US-Iran conflict and uncertainty about the Federal Reserve’s interest rate decisions continue to impact market sentiment.

Gold Prices Attempt Recovery Amid Market Volatility

Gold (XAU/USD) is showing signs of rebounding on Monday after experiencing significant selling earlier in the day. This modest uptick is occurring as both the US Dollar and Treasury yields retreat from their recent peaks, with investors responding to evolving global economic and geopolitical developments.

Currently, XAU/USD is trading close to $5,100, having bounced back from a daily low near $5,014. Despite this recovery, buying momentum remains weak, and gold is still down roughly 1% for the session.

Rising Oil Prices Intensify Inflation Fears Amid US-Iran Tensions

Gold has been highly volatile since hostilities between the US and Iran escalated. Heightened geopolitical risks are sustaining demand for safe-haven assets, helping to prevent steeper declines. However, the ongoing conflict is disrupting oil shipments through the Strait of Hormuz, causing crude prices to soar and amplifying concerns about global inflation.

West Texas Intermediate (WTI) crude oil surged to approximately $113 per barrel, marking its highest point since June 2022, before easing slightly after reports emerged that G7 nations may coordinate an oil reserve release via the International Energy Agency (IEA) to address supply issues. At the moment, WTI is trading near $100 per barrel, up nearly 13% on the day.

Although gold is traditionally seen as a hedge against inflation, inflation driven by rising oil prices tends to boost Treasury yields and strengthen the US Dollar, while also dampening expectations for imminent rate cuts from major central banks. These dynamics are limiting gold’s upside potential.

Markets have responded swiftly to the spike in energy prices by lowering expectations for Federal Reserve rate cuts. The CME FedWatch Tool now shows a 30% chance of a 25 basis-point rate reduction in June, down from about 50% a month ago. The likelihood of a July cut is currently around 40%.

Weak US Jobs Data Raises Stagflation Concerns Ahead of Inflation Reports

The recent disappointing US Nonfarm Payrolls (NFP) report has complicated the economic outlook, highlighting growing stagflation risks and presenting the Federal Reserve with a challenging policy environment as it tries to address persistent inflation and a weakening labor market.

In February, the US economy lost 92,000 jobs, falling short of expectations for a 59,000 gain, following an increase of 126,000 jobs in January. The unemployment rate climbed to 4.4%, up from 4.3% the previous month.

Looking forward, upcoming US inflation data this week may influence rate expectations. Analysts anticipate the Consumer Price Index (CPI) will remain steady at 2.4% year-over-year for February, unchanged from January. The Core Personal Consumption Expenditures (PCE) Price Index for January is also expected to stay at 3.0% year-over-year.

Gold Technical Outlook: XAU/USD Rangebound Between $5,000 and $5,200

From a technical standpoint, gold’s short-term trend remains neutral, with prices fluctuating between $5,000 and $5,200.

XAU/USD is currently trading just below the 100-period Simple Moving Average (SMA) near $5,118, while the 50-period SMA at $5,189 is acting as resistance, signaling waning bullish momentum and indecision in market direction.

If gold breaks decisively below the 100-period SMA, it could retest the psychological $5,000 level. Sustained weakness below this support may target further declines toward $4,850, the February 18 low, and then $4,650, the February 6 low.

Conversely, a move above the $5,200 resistance zone could reignite bullish sentiment and open the path toward the $5,400-$5,500 range.

Momentum indicators support this consolidation view. The Relative Strength Index (RSI) is hovering around 43, below the neutral 50 mark, indicating mild bearish pressure but not oversold conditions.

Meanwhile, the Moving Average Convergence Divergence (MACD) is slightly below zero with a flat profile, suggesting a lack of clear direction in the near term.