Gold price outlook: XAU/USD faces downside risk after bearish crossover

Gold slipped back into negative territory on Friday, falling below the $4,200 mark after briefly recovering

Gold slipped back into negative territory on Friday, falling below the $4,200 mark after briefly recovering during Thursday’s short-covering rally. That earlier rebound, which pushed prices above $4,200, proved temporary as selling pressure returned in Asian trading hours. With this move, the precious metal is now on track to record a second consecutive weekly decline, after earlier in the week testing year-to-date lows close to the $4,000 psychological level.

Market sentiment around Gold has been heavily influenced by a mix of geopolitical tensions and shifting macroeconomic expectations. Renewed instability in the Middle East has added fresh uncertainty. Reports indicate that US forces intercepted and destroyed two Iranian one-way attack drones, allegedly targeting commercial vessels passing through the strategic Strait of Hormuz. According to a US official , these incidents point to continued risks to maritime security in the region. At the same time, Iranian state media reported an explosion in southern Iran, attributing it to a confrontation involving a “violating vessel” attempting to navigate the Strait of Hormuz, further escalating tensions.

Despite these developments, hopes of diplomatic progress briefly supported risk sentiment earlier in the week. Current US President Donald Trump suggested that an agreement with Iran could be finalized “maybe over the weekend in Europe,” implying that the Strait of Hormuz might reopen fully once a “great settlement” is signed. He also indicated that planned military actions had been suspended in anticipation of a potential deal. However, Iranian officials quickly pushed back on these claims, stating that no final decision has been made regarding any agreement with the United States. Adding to the uncertainty, Israel’s prime minister’s office clarified via social media that Israel is not involved in the reported US–Iran memorandum of understanding.

These conflicting signals have undermined confidence in a near-term peace deal, contributing to renewed volatility across global markets. Oil prices, which had recently touched two-month lows, have rebounded as traders price in the risk of supply disruptions stemming from the Strait of Hormuz tensions. This rebound in crude has also weighed indirectly on Gold sentiment, limiting its ability to stage a sustained recovery.

On the macroeconomic front, stronger-than-expected US inflation data has reinforced expectations of tighter monetary policy. Markets, as reflected by the CME FedWatch Tool, now largely anticipate a 25-basis-point rate hike from the Federal Reserve in December. Since Gold is a non-yielding asset, higher interest rates tend to reduce its attractiveness compared to interest-bearing investments, adding further downside pressure.

Looking ahead, traders are closely watching the preliminary University of Michigan Consumer Sentiment and Inflation Expectations data, scheduled for release later on Friday. These indicators are expected to influence US dollar movements and, in turn, impact Gold pricing. In addition, geopolitical developments in the Middle East will remain a key driver of volatility in the short term.

From a technical perspective, Gold’s outlook remains tilted to the downside. The metal continues to trade below all major moving averages on the daily chart, including the 21-day, 50-day, 100-day, and 200-day simple moving averages. This alignment signals sustained overhead resistance and weak underlying momentum. The Relative Strength Index (RSI) is currently hovering near 35, indicating bearish momentum that is not yet fully oversold, leaving room for additional downside pressure if selling continues.

A bearish crossover has also emerged, with the 21-day moving average dropping below the 200-day moving average, reinforcing a negative technical structure. Immediate resistance is seen near $4,430, followed by stronger barriers around $4,450. Further upside hurdles are located at approximately $4,586 and $4,768. Overall, the broader technical outlook remains negative as long as Gold stays below these key resistance levels.