GOLD rebounds, but is it out of the woods yet?

• Gold holds the recovery from seven-week lows, but remains below $4,600 early Thursday.
• The US Dollar Index corrects sharply on US-Iran peace deal hopes, but hawkish Fed expectations could limit the downside.  
• Gold defends the falling wedge resistance-turned-support near $4,430, with bearish daily RSI in play.

Gold is looking to build on the previous recovery from seven-week lows of $4,454 early Thursday, with buyers eyeing a retest of the $4,600 threshold amid positive risk sentiment.

Asian markets take the positive lead from Wall Street overnight amid renewed hopes that a peace deal between the United States (US) and Iran is in the offing, especially after President Donald Trump said that the US was in the ‘final stages’ with Iran.

That, alongside upbeat earnings results from the American artificial intelligence (AI) pioneer Nvidia and a suspended workers’ strike at Samsung Electronics, lifted shares of chipmakers and, in turn, the market mood.

The sustained market optimism diminishes the safe-haven appeal of the US Dollar (USD) while keeping Oil prices and inflation fears in check. These factors help Gold maintain its recovery momentum.

However, it remains to be seen if the bright metal extends its recovery beyond the $4,600 round figure amid hawkish expectations around the US Federal Reserve (Fed) interest rate outlook.

The Minutes of the Fed’s April monetary policy meeting showed on Wednesday that “a majority of Fed policymakers felt ‘some policy firming would likely become appropriate’ if inflation stays persistently above the central bank’s 2% target,” per Reuters.

Further, Gold’s turnaround could face headwinds if the geopolitical situation between the US and Iran turns south; with Trump doubling down on the warning of further attacks unless Iran agreed to reach a deal.

Also, the top-tier US S&P Global Manufacturing and Services PMI data will be closely eyed for a fresh take on the economy and the Fed’s policy outlook, which could have a strong bearing on the non-yielding Gold.

Daily technical analysis

In the daily chart, XAU/USD trades at $4,547.63. The pair remains under a clear topside cap, with price holding below the 21-day simple moving average (SMA) at $4,623.97, the 50-day SMA at $4,678.34 and the 100-day SMA at $4,796.64, keeping the near-term bias bearish despite a modest rebound off recent lows. The longer-term backdrop is still constructive as bullion trades above the 200-day SMA at $4,370.13, yet a Relative Strength Index (14) reading near 42 hints at lingering downside pressure while the broader downward resistance trend line continues to weigh on rallies.

On the topside, initial resistance is located at the 21-day SMA near $4,623.97, with additional barriers at the 50-day SMA around $4,678.34 and the 100-day SMA at $4,796.64, ahead of the descending resistance trend line that has repeatedly capped advances in recent months. On the downside, the 200-day SMA at $4,370.13 marks the next significant support level; if the falling wedge resistance-turned-support near $4,430 gives way. A decisive break beneath this longer-term 200-day SMA floor would likely open the way to a deeper corrective phase.