The yellow metal has fallen by nearly 25 per cent from the record highs it reached in January, according to analysts.
Gold prices in Dubai remained stable despite renewed regional tensions after Iran launched attacks against its adversaries.
Gold continues to be viewed as a safe-haven asset despite renewed hostilities between the US and Iran. The two sides had paused attacks over the weekend before Tehran launched what were described as “surprise attacks” on Wednesday morning.
The yellow metal has fallen by nearly 25 per cent from the highs recorded in January, analysts said, with historical trends showing that bullion can take time to recover after reaching major peaks.
Inflation concerns remain a key focus for investors, with WTI crude oil trading at $81.60, nearly 15 per cent higher than last month. The increase in energy prices has overshadowed some of the short-term optimism following recent announcements from US President Donald Trump.
“Market participants will also closely track the Fed meeting this Wednesday, as renewed tensions in the Middle East have triggered a rise in energy costs,” said Vijay Valecha, CIO of Century Financial.
“According to CME FedWatch, the probability of current rates being maintained is at 64 per cent,” Valecha said. “However, markets are still pricing in a 90 per cent probability of a rate hike by the end of the year. Expectations of higher rates typically increase pressure on non-yielding metals, making them less attractive.”
Technically, gold is trading around $4,050 and has remained within a range over the past month, between $3,945 and $4,160. The daily 14-period Relative Strength Index has remained below the 50 level since April, indicating limited upward momentum.
The metal is also continuing to follow a long-term downward trendline connecting previous highs of $5,420, $4,774 and $4,130.
Valecha said a break below the recent support level of $4,022 could see gold test lows of $3,945. On the other hand, a decisive breakout and close above $4,160 would indicate stronger bullish momentum.
