22.07.202613:00 Forex Analysis & Reviews: XAU/USD: Gold ignores risk-off flight and strengthens above 4,100.00

See also: InstaForex trading indicators for XAU/USD

Gold continues to surprise the market, posting a fourth consecutive session of gains and comfortably holding above the psychologically important level of 4,100.00. XAU/USD is up almost 2.5% since the start of the week and is moving toward its best weekly result in more than three months, ignoring the escalation of geopolitical tensions in the Middle East and rising oil prices.

At the time of the European session on Wednesday, XAU/USD is trading around 4,110.00–4,130.00, consolidating after the recent rally. A key driver of the advance was the resumption of hostilities between the United States and Iran, which entered a ninth night of strikes. US President Donald Trump rejected the prospect of immediate talks with Tehran and threatened strikes on nuclear facilities, to which Iran warned of a widening regional conflict.

At the same time, Iran-backed Houthis announced a maritime blockade of the Bab-el-Mandeb Strait, forcing several Saudi oil tankers to turn back in the Red Sea. These events, together with attacks on Russia's Black Sea coast — through which a significant share of Kazakhstan's oil exports transits — create serious risks for global energy supplies. Oil market experts note that, if current disruptions persist, Brent near 91 dollars per barrel looks undervalued.

Oil, USD, and gold: breakdown of familiar links

In the classical model, rising oil prices and a stronger US dollar usually weigh on gold. However, the current situation demonstrates a breakdown in that correlation:

Oil shock: rising oil prices (Brent topping $91 per barrel) traditionally support the dollar because they strengthen the US trade position as an energy exporter. The dollar rises, yet gold does too: the US dollar index continues to strengthen, hovering around 101.00, but gold is not responding with the classic decline.

Gold is regaining its safe-haven status: gold is advancing despite a strong dollar and rising bond yields, which points to investors returning to the metal as a defensive asset amid escalating geopolitical tensions.

Academic research confirms that the interrelationship between gold, oil, and the dollar intensifies in crisis periods, and dollar volatility improves risk forecasts for gold and oil. However, the present situation shows that classical arbitrage between these assets can break down when the geopolitical factor becomes dominant.

Brief technical analysis

From a technical standpoint, XAU/USD retains a short-term bullish bias, confirming a breakout of the downtrend line from late-May highs. On the 4-hour chart, the price holds above the breakout zone near 4,020.00 and is moving toward key resistance levels at 4,160.00 (EMA200) and 4,200.00 (psychological level). The price also remains above the 50-period EMA (4,054.00), which reinforces the short-term bullish impulse.

However, it is still below the key moving averages 50-day (4,230.00), 144-day (4,370.00), and 200-day (4,305.00), which indicates that the broader bearish trend is not yet broken.

On that basis the most likely path is volatile consolidation in the 4,050.00–4,200.00 range with an attempt to break higher if geopolitical tensions persist and US inflation data remain weak.

Key events to watch

- July 23 — ECB meeting. Forecast: policy rate to be left at 2.25%. Expected impact: indirect via dollar and euro dynamics.

- July 23 — US initial jobless claims data. Expected impact: affects Fed policy expectations.

- July 28–29 — Fed meeting. Forecast: policy rate expected to remain at 3.50–3.75%. Expected impact: dovish signals = support for gold; hawkish = pressure.

- During the week - development of the geopolitical situation. Escalation = rally; de-escalation = correction.

Key points to monitor

1. Geopolitical situation in the Middle East. The US–Iran conflict has entered a ninth consecutive night of strikes, and President Trump's threats to hit nuclear facilities and statements that the US "is not done with Iran" indicate no signs of de-escalation. Mediators proposed a 10-day ceasefire, but Trump rejected immediate talks. Any development—whether escalation (strikes on nuclear sites, blockade of Bab-el-Mandeb) or an unexpected de-escalation—could move gold sharply by $50–100.

2. Disruptions to oil supplies and energy prices. Current disruptions affect three key routes: the Strait of Hormuz, the Red Sea (Bab-el-Mandeb), and the Black Sea (the CPC terminal in Russia). Saudi tankers are turning back because of the Houthi blockade, and Kazakhstan's exports via CPC are at risk. Oil experts note that if these disruptions persist into August, Brent near $91 per barrel appears undervalued. Rising oil creates inflationary pressure that may support gold as an inflation hedge in the long term, while in the short term it can boost the dollar and pressure the metal.

3. ECB meeting (Thursday, July 23). Although not a direct driver of XAU/USD, ECB rhetoric can affect dollar dynamics and global capital flows. Markets price a hold at 2.25%, but any shift in guidance could change expectations for euro area policy and indirectly influence gold.

4. US initial jobless claims (Thursday, July 23). This indicator remains important for assessing the US labor market. Coupled with recent weak inflation prints, any sign of labor market softening could strengthen expectations of a Fed pause and support gold. Strong claims data would, by contrast, bolster the dollar and weigh on the metal.

5. Fed meeting (July 28–29). This is the main event for gold over the next two weeks. Markets almost fully price a hold at 3.50–3.75%. The key issue is forward guidance: if the Fed signals a pause, it will be a powerful catalyst for gold; if the regulator maintains hawkish language amid geopolitical risks, it could cap the metal's upside.

6. US PCE inflation data — next week. The personal consumption expenditures price index, the Fed's preferred inflation gauge, is the next major macro release. Weak PCE readings would reinforce expectations of a pause and support gold. Strong PCE readings, especially alongside rising oil, could revive fears of further tightening and pressure the metal.

Conclusion and recommendations for investors

Gold is at the intersection of geopolitical risk and monetary expectations. The key level, 4,200.00, remains the main watershed for short-term price action. In the coming days, the market will focus on geopolitical developments, US inflation data, and the Fed outcome (next Wednesday), which may provide new signals for the next move.

For short-term traders: long positions are likely amid a break above 4,160.00 with targets at 4,200.00–4,300.00. Consider shorts only on a break below 4,050.00 confirmed by fundamental factors.

For medium-term investors: adopt a wait-and-see stance until the geopolitical picture and US inflation data clarify. A correction to 4,000.00–4,050.00 could be used to enter longs if geopolitical risks persist and structural support factors remain (central bank demand and fiscal deficits).

Risk management: remain cautious given high volatility from geopolitical events and macro releases. Use strict stop-loss discipline and monitor developments in the Middle East and Fed commentary.