- Gold (XAU/USD) prices have broken above the key $4,600/oz psychological barrier.
- Middle East tensions are escalating as diplomacy stalls and the US continues a military buildup, fueling market uncertainty.
- The rare negative correlation between Crude and Gold appears to be shifting, with rising Oil prices potentially benefiting Gold by compressing real interest rates and bringing back the “inflation hedge” narrative.
- Gold needs to find acceptance above the $4600/oz handle for bullish momentum to continue.
Gold prices have risen over the last two days to pierce above a key psychological barrier at the $4600/oz handle. The precious metal is eyeing acceptance above this level which could lead to further upside in the days ahead, if the geopolitical picture remains supportive.
Middle East Tensions: Diplomacy stalls as military buildup adds to market uncertainty
Hopes for a swift de-escalation in the Middle East have taken a hit as Iran signals a clear reluctance to engage in direct negotiations with the US. This friction is undermining what was already a fragile diplomatic process, leaving market participants wary of a prolonged standoff.
Iranian President Pezeshkian summed it up by saying Iran was attacked twice during the talks, proving the US does not believe in diplomacy. However, he followed this up by saying that Iran is ready to end the war, but wants guarantees. This mixed messaging is similar to what we have been seeing from the US administration as well.
Adding fuel to the fire, the US continues to deploy additional troops and military assets to the region. As uncertainty climbs, the focus remains firmly on how these developments will impact broader market sentiment and the demand for safe-haven assets.
Oil and Gold correlation shifts
Since the onset of the conflict in the Middle East, we have witnessed a rare and sustained negative correlation between Crude and Gold. Usually, these two move in tandem as hedges against geopolitical risk.
However, the recent spike in Oil prices forced a massive repricing of Fed expectations:
Rising Oil = Inflationary Pressure: As energy costs soared, markets were forced to price out previously anticipated Fed rate cuts.
Gold’s Sensitivity: With the “pivot” narrative delayed, Gold lost its luster as a non-yielding asset, leading to the sharpest decline in nearly two decades.
The tide may be turning. Over the last few sessions, we’ve seen Gold and Oil begin to rise at the same time, a signal that the negative correlation is changing.
With Fed funds futures now effectively ruling out further rate cuts, but the market remaining skeptical of additional hikes, we enter a new phase. If the Fed remains on hold while Oil continues to climb, inflation expectations will naturally rise. This scenario would lead to a compression in real interest rates (nominal rates minus inflation).
As long as the Fed remains sidelined and refuses to entertain further hikes, rising Oil prices may actually provide a tailwind for Gold by dragging real yields lower.
For gold bugs, the “inflation hedge” narrative might finally be back on the table.
Where to next?
The US dollar is still playing a role and with high impact US data ahead this week we could still see some volatility.
However, it is Easter this weekend and thus the closer to the weekend we get the greater the probability that we could see a thinning of liquidity and thus some sideways price action.
Market participants will still be keeping a close watch on the geopolitical developments in the Middle East and any changes to the situation could impact gold prices.
For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)
Technical Outlook – Gold (XAU/USD)
Gold (XAU/USD) is showing signs of a technical recovery on the H4 chart, successfully reclaiming the $4,600 handle.
After a period of aggressive selling, price action has established a solid ascending trendline, suggesting that the “buy the dip” mentality is returning to the market.
Key Levels to Watch:
- Resistance: The immediate hurdle sits at $4,700. A sustained break above this level could open the door for a retest of the $4,800 area.
- Support: The recent pivot at $4,500 remains a crucial psychological floor. As long as the ascending trendline holds, the bullish structure remains intact.
The RSI is currently hovering around 62, indicating that while momentum is positive, there is still room to run before hitting overbought territory. Bulls will be looking for a daily close above $4,600 to confirm this recovery phase.
Gold (XAU/USD) Four-Hour Chart, March 31, 2026
Source: TradingView (click to enlarge)
