Blockage of the all-important Strait of Hormuz has caused the largest disruption in the oil market, and gold price is feeling the heat. While the long-term outlook remains bullish, investors are keen on how the Fed and other major central banks will respond to the uncertainties. Besides, hopes of a ceasefire in the Middle East remain fragile after Iran rejected the US peace plan.
Bulls strive to defend crucial support as oil prices rise
Gold is a conventional safe-haven asset in times of geopolitical tensions and economic uncertainties. Indeed, these were some of its key bullish drivers during its historic rally of 2025. However, the ongoing US-Iran war has changed the dynamics.
Since the start of the war at the end of February, the bullion has dropped by over 15%. Earlier in the week, it plunged to its lowest level in four months at $4,100. It has since erased some of those losses to trade at $4,426 as at the time of writing.
On the one hand, the extreme fear continues to shape the broader market. Compared to a fear level of 42 in the previous month, the fear & greed index is at an extreme fear level of 19. Notably, the indicator tracks the market sentiment.
As confusion hits the risk sentiment, gold’s safe-haven appeal continues to offer support to the prices. Indeed, the plunge recorded earlier in the week signaled that the long-term investors maintain a bullish outlook. The precious metal bounced off its long-term 200-day EMA and has since held steady above the support zone of $4,200.
Even with this bullish outlook, the market remains keen on how the Federal Reserve and other major central banks will react to the events surrounding the US-Iran war. In the latest FOMC meeting, the US central bank held interest rates steady while citing economic uncertainties and sticky inflation.
Investors are increasingly betting for a rate hike before the year end; a shift from the two rate cuts priced in at the start of the year. The BOE and BOJ have also turned hawkish in reaction to the conflict. An environment of higher interest rates tends to weigh on the non-yielding bullion while bolstering Treasury yields.
In the ensuing sessions, volatility is set to influence gold price movements as investors remain fixated on the headlines. The surge of crude oil prices back above the psychologically crucial zone of $100 a barrel is one of the underlying factors. At the time of writing, Brent futures were at $100.50 after plunging to $93.45 in the previous session.
Gold price technical analysis
Gold price chart | Source: TradingView
Bulls in the gold market are striving to defend the support at $4,400 amid the heightened volatility. Even with crude oil price back above to three-digit level, the 200-day EMA at $4,208 is set to offer strong support as long-term investors maintain a bullish outlook.
Nonetheless, $4,400 is an important support level in the immediate term. With the fragile hopes of a ceasefire, the possible gold price gains may be curbed at $4,650. On the flip side, a pullback past the current support level will likely activate the lower zone of $4,300.
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