Gold Analysis: XAU/USD falls despite renewed Middle East tensions

Gold is starting to face difficult trading sessions. Over the last 2 trading sessions, XAU/USD has shown a renewed weakness bias, with a decline of just over 3.00%.

This selling pressure has held as new tensions in the Middle East appear to be reactivating the appeal of relevant substitute assets for gold, such as the bond market and the U.S. dollar. If this dynamic continues, the current selling pressure could become even more relevant in gold price movements over the next few trading sessions.

Is the Middle East becoming a concern again?

Although there had been a potential temporary agreement to reduce the conflict in the Middle East and normalize the passage of ships around the Strait of Hormuz, an attack on 3 commercial vessels was recently reported. This event led the United States to launch new military actions against Iran and revoke the permit that allowed Iran to sell oil openly to the global market.

In fact, the renewed tensions have reached a point where comments from President Trump suggested that the ceasefire with Iran was over, making the possibility of reaching formal negotiations even more complicated.

The impact on risk perception has started to become important. Once again, the risk premium around the conflict has increased, while the WTI oil barrel has risen close to 10% over the last 2 sessions. This could be reviving fears of inflationary pressures for 2026 and once again reflecting the possibility of more aggressive central banks to control these additional pressures.

This effect has not been entirely favorable for gold. Although gold is usually considered the safe-haven asset par excellence, the conflict in the Middle East has given more weight, for months, to other substitute safe-haven markets such as bonds and the dollar.

In fact, looking at the recent behavior of the 10-year U.S. bond market, a new increase in interest rates stands out, with yields now approaching the 4.6% area. In addition, the market maintains an aggressive upward slope in the short term, showing greater potential appeal in this substitute market for gold, which appears to be reacting more strongly to the increase in tensions in the Middle East.

Source: TradingEconomics

The increase in the appeal of the bond market could also be generating greater demand for the U.S. dollar. The currency could be benefiting both from international capital inflows into the bond market and from the escalation of the conflict, as the dollar usually acts as a liquidity safe-haven currency during episodes of higher tension in the Middle East.

This renewed demand is already reflected in the recent movements of the DXY index, which measures the dollar’s strength against its main peers. Since the new escalation of the conflict and amid solid interest rates in the bond market, the indicator has continued to move above the 101-point area, maintaining a relevant upward slope. This indicates that demand for the U.S. dollar remains important.

Source: TradingEconomics

All of this is crucial for gold, because a more attractive bond market and a stronger dollar can create a difficult scenario for the metal to regain strength. At the moment, gold is not being viewed as a liquidity safe-haven asset as attractive as the dollar, and it also does not pay interest like bonds.

This could be generating a loss of demand, as the market seeks exposure to substitute assets for gold. If the appeal of these markets continues to strengthen due to the reactivation of the conflict in the Middle East, gold could remain in a difficult position to recover ground in the short term. As a result, selling pressure on XAU/USD could remain relevant over the next few trading sessions.

 

Technical outlook for Gold

Source: StoneX, Tradingview

• Bearish trend line comes back into play: Despite gold’s recovery attempts in previous weeks, the most relevant technical event on the daily chart continues to be the long bearish trend line that has dominated the market for months. Given the lack of relevant bullish moves, this structure remains the most important dominant pattern to watch. If selling pressure manages to stabilize in the short term, a potential extension of this bearish trend line could remain relevant in the average movements of XAU/USD over the coming trading weeks.
   

• RSI: Now, the RSI indicator line maintains a bearish slope below the neutral 50 line. This indicates that the average selling impulse of the last 14 sessions remains relevant in the chart’s movements. If this behavior continues, a significant selling bias could remain important over the next trading sessions.
   

• TRIX: The TRIX indicator line continues to show downward movements below the neutral 0 level. This suggests that the average strength of long-term exponential moving averages remains in bearish territory. For now, this reading shows that, in the broader chart outlook, there is still a relevant selling bias to consider over the next few sessions.
   

Key levels to watch:

• 4,345 USD – Crucial resistance: This level corresponds to relevant highs that align with the major bearish trend line and coincides with the barrier marked by the 50-period simple moving average. Price movements returning to this level could put the current bearish trend line at risk and open room for a more relevant buying bias over the coming weeks.
   
• 4,182 USD – Near-term barrier: This recent neutral zone coincides with important retracements from recent weeks. If price remains too close to this level, a phase of indecision could be reinforced, potentially opening room for a short-term sideways range.
   
• 3,886 USD – Critical support: This level is associated with relevant lows from October 2025 and is considered the next most important bearish barrier. Movements toward this zone could once again highlight a clearer selling bias and extend the bearish trend line as the dominant technical structure over the following weeks.
   

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25