Gold price breaks higher as US Dollar weakness fuels rally

Gold price (XAU/USD) surges over 1.50% on Wednesday, cracks a key resistance trendline and hits a new two-week high as the Greenback weakens. This Bullion price action comes despite rising tensions and hostilities between the US and Iran. The XAU/USD trades at $4,146 after bouncing off a low of the day (LOD) of $4,076.

XAU/USD jumps as buyers overpower yield and Oil risks

Sentiment remains neutral, though the yellow metal gets a tailwind from the fall of the US Dollar Index (DXY). The DXY, which tracks the performance of the American currency against six other currencies, is down 0.07% to 101.12. 

It's worth noting that tensions in the ongoing Gulf war remain high after US President Donald Trump warned Iran that if they attack more ships, the US would retaliate by attacking bridges or power plants, including those located near the country’s capital.

As the news broke, West Texas Intermediate (WTI), the US crude benchmark, rose over 6% to $86.80 per barrel. Surprisingly, the positive correlation between Crude prices and the US Dollar appears to be breaking, as the latter is registering losses.

The US 10-year Treasury yield is up nearly three basis points to 4.654%. Meanwhile, money markets had priced in a 65% chance that the Fed will keep rates unchanged at the July 29 meeting, down from 78% a day earlier, according to Prime Terminal data.

Bullion buyers bought the dip, sending XAU’s price past $4,100, opening the door for further upside. However, a larger-scale war against Iran could prompt investors to book profits as high energy prices increase the Dollar’s safe-haven appeal.

The US Secretary of State, Marco Rubio, said that the US is willing to negotiate an end to the conflict but added that Tehran is not serious about talks.

In the US, the economic docket is absent, yet traders are waiting for the release of Initial Jobless Claims for the week ending July 18. Alongside this, traders are also bracing for S&P Flash PMIs and the Federal Reserve’s (Fed) monetary policy decision next week.

XAU/USD technical outlook: Gold price reclaims $4,100, eyes on 50-day SMA

Gold stages a recovery, breaking a downtrend resistance line and clearing the path to test the $4,200 mark. Momentum as measured in the Relative Strength Index (RSI) turned bullish. Hence, XAU/USD might test the 50-day Simple Moving Average (SMA) at $4,253 in the near term. Once those levels are cleared, the next resistance is the key psychological levels of $4,300 and $4,400. Once breached, the next stop is the 200-day SMA at $4,496.

For a bearish reversal, Gold must drop below $4,100. Below this area sits the July 21 daily low of $3,999, ahead of the October 28, 2025, low of $3,886.