Spot gold traded in a tight range on Tuesday, with traders weighing fresh geopolitical developments from the Middle East against persistent concerns over US monetary policy tightening. Bullion recovered from an intraday low of $4,291 to hover near $4,338 as markets digested a mix of headlines affecting risk sentiment and the US dollar.
A senior Iranian official suggested that Tehran could reopen the Strait of Hormuz within seven days if Washington lifted port blockades and reduced military pressure. The proposal was reportedly relayed to US authorities through mediators, prompting the dollar to give back some early gains and helping gold claw back part of its losses. Oil prices also extended their slide for a fifth consecutive session on the news.
However, both the greenback and crude rebounded after traders parsed recent comments from former President Trump, who indicated that a potential agreement with Iran could be reached shortly after the November 3 midterm elections. The dollar index hovered around 100.60, just below its session high of 100.69, a level not seen since July 30. Meanwhile, US West Texas Intermediate crude traded near $90, down roughly 1.31% on the day.
The dominant headwind for gold remains the Federal Reserve's hawkish stance. Unless the reopening of the Strait of Hormuz triggers a significant drop in oil prices and cools inflation expectations, bullion is unlikely to stage a vigorous rally. As gold yields no interest, a rising borrowing cost environment typically pressures the metal. Last week, the Fed raised its benchmark rate by 25 basis points to a range of 3.75%-4.00%, as policymakers battle sticky inflation and elevated energy prices. Among the 18 officials, 16 anticipate at least one more rate hike this year.
Analysts at ING noted that bullion opened the week on a soft note as investors assessed the implications of the Fed's first rate increase since 2023 and the possibility of further tightening. The analysts pointed to public remarks from Fed officials that have "reinforced concerns that inflation remains elevated," thereby supporting expectations that "rates will stay higher for longer." While ING acknowledged that "tight monetary policy remains a headwind for gold," it also highlighted that holdings in gold ETFs stand at six-month highs and sustained central bank buying should cushion downside moves.
Technical analysis shows spot gold holding above its 50-day and 100-day simple moving averages, which sit at $4,301 and $4,316, respectively. However, prices remain below the 200-day simple moving average at $4,541. This configuration suggests a neutral near-term bias, with bullion sandwiched between short-term trend support and longer-term resistance. Momentum indicators also point to rangebound trading: the Relative Strength Index reads 47, close to the neutral 50 mark, while the MACD stays in negative territory, though its red histogram is narrowing, signaling waning bearish momentum.
To the downside, the cluster of $4,316 (100-day SMA) and $4,301 (50-day SMA) forms critical support. A decisive break below this zone could expose $4,150, followed by the psychological $4,000 level. On the upside, the 200-day SMA at $4,541 serves as primary resistance, with the $4,700 mark acting as the next hurdle. A sustained advance through both levels would strengthen the bullish outlook.
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