Gold (XAU/USD) traded within a volatile range on Tuesday as markets awaited the deadline set by US President Donald Trump for reaching an agreement with Iran. At the time of writing, gold (XAU/USD) was trading around $4,657, with no clear direction in price action, as traders awaited news on the possibility of a truce agreement before the deadline.

Traders are cautious ahead of Trump's Iran deadline

Traders are closely watching the situation ahead of the crucial deadline set by US President Donald Trump later today, in which he warned Iran that it must "make a deal or open the Strait of Hormuz" by 8:00 PM EST (8:00 AM GMT Wednesday). Trump threatened to target Iran's energy and civilian infrastructure if no agreement is reached.

Initial optimism about a possible ceasefire quickly faded. Iran’s official news agency, IRNA, reported on Monday that Tehran had rejected a ceasefire proposal brokered by Pakistan and instead offered a ten-point plan that included a permanent end to the war, the lifting of sanctions, and a formal framework to ensure safe passage through the Strait of Hormuz. Trump described Iran’s proposals as “a very important step,” but said they were “not enough.”

Despite escalating geopolitical risks, gold is struggling to attract sustained safe-haven demand. This is partly due to the stability of the US dollar, as global demand for liquidity continues to outpace traditional flows into gold.

 

Rising oil prices are forcing markets to reduce expectations of Federal Reserve interest rate cuts

Another factor weighing on gold is rising oil prices, which are increasing concerns about inflation and raising risks to economic growth. This reinforces expectations that major central banks, particularly the Federal Reserve, will keep interest rates high for longer.

This is likely to be reflected in the US inflation data for March, due later this week. Economists expect the Consumer Price Index (CPI) to rise 0.9% month-on-month, up from 0.3% in February, while annual inflation is expected to accelerate to 3.3% from 2.4%.

Markets have largely ruled out interest rate cuts this year, compared to previous expectations of at least two reductions, which continues to weigh on the non-yielding metal.

 

Strong central bank buying keeps the broader outlook for gold intact

Despite potential near-term weakness in gold, the overall outlook remains bullish. Structural demand continues to support prices, driven by ongoing central bank purchases, high levels of sovereign debt in major economies, and strong retail investment demand through exchange-traded funds (ETFs).

According to Bloomberg, the People’s Bank of China added approximately 160,000 troy ounces, or nearly 5 tons, of gold in March. This marked the 17th consecutive month of purchases. In addition, global central banks bought a net 25 tons in the first two months of the year, according to estimates from the World Gold Council.

Technical Analysis: Gold/US Dollar Forms Bearish Flag Pattern on 4-Hour Chart

Technically, the 4-hour chart shows that the gold/US dollar pair is forming a bearish flag pattern, with downside risks increasing as prices pressure the lower boundary of the pattern.

The 100-period simple moving average (SMA), near $4,654, continues to act as overhead resistance, with repeated rejections limiting upward attempts. A sustained break of this level could open the way for a move towards the 200-period SMA, near $4,908.

On the other hand, the 50-period SMA around $4,585 provides some protection, although a sustained break below this level could open the door for deeper losses towards the $4,400 area, with downside risks extending to $4,100.

Momentum indicators remain mixed, with the Relative Strength Index (RSI) hovering near the 50 level, indicating a lack of a clear direction. Meanwhile, the Moving Average Convergence Divergence (MACD) chart remains negative, with the MACD line below the signal line and close to the zero line, suggesting weak downward pressure rather than strong selling momentum.