Why gold is selling off in a war, and what the FOMC could do next week. These are the key levels to watch

Gold is still down around 10% since the Iran war began, even as the conflict has entered its most escalated phase yet. Iran’s parliament speaker Ghalibaf has reportedly resigned from the negotiating team, air defences have been engaging in Tehran, Brent has pushed above $105, and the Strait of Hormuz remains effectively closed.

By the traditional playbook, this is the kind of backdrop where gold could be pushing to new all-time highs. Instead, the metal is trapped below the $4,800 to $5,000 resistance zone, and the daily chart is starting to look like it could be forming a top.

The reason could come down to a single transmission chain, and next week’s FOMC decision could be the moment that decides whether that chain holds or breaks.

Key takeaways

• Gold is still down around 10% since the start of the Iran war, despite fresh escalation in the Middle East
• The dominant driver appears to be the macro chain that runs from oil into inflation, and from inflation into Fed policy
• The daily chart shows a potential rounding top at the $4,800 to $5,000 resistance zone
• The daily 20 EMA has failed to cross back above the 50 EMA, keeping momentum weak
• Next week’s FOMC decision on 29 April is a key event that could determine the next leg

Why gold could be selling off in a war

The move in gold looks counterintuitive on the surface, but it could line up with a clearer macro chain. War escalation can push oil higher. Higher oil tends to lift inflation expectations. Sticky inflation could keep the Fed hawkish. A hawkish Fed tends to support the dollar and yields. And a stronger dollar with rising yields could weigh on a non-yielding asset like gold.

That chain appears to have played out since late February. Brent is back above $105, the US 10-year yield is holding around 4.3%, and the Dollar Index is sitting near 98.5. All three variables have been running against gold, and the move down from the February highs above $5,400 could reflect that dynamic more than it reflects the geopolitical headlines.

According to CME Group data, the market is currently pricing a near-certain hold at 3.50% to 3.75% on 29 April. That could leave limited room for a dovish surprise, and any hint of hawkishness in the statement or press conference could add further pressure to the gold price. Kevin Warsh’s Fed Chair confirmation hearing this week added another layer of policy uncertainty, with Warsh calling for a new framework to address persistent inflation.

The setup going into next week is relatively straightforward to map. As long as oil stays elevated and the Fed stays on hold, the pressure on gold could remain. A softer tone from the Fed, or a meaningful drop in oil, could be what it takes to shift the balance back in gold’s favour.

Daily chart

The daily chart is showing what could be the early stages of a rounding top at the $4,800 to $5,000 resistance zone. This zone has capped price on multiple attempts since the February high, and it is reinforced by the confluence of the daily 20 EMA and 50 EMA sitting inside the area.

Despite the recent push higher, the 20 EMA has not managed to cross back above the 50 EMA. That failure to reclaim bullish momentum could be an early signal that the underlying trend is weakening rather than resuming, with price now appearing to roll over from the lower edge of the resistance zone.

The two zones that matter on the higher timeframe:

• Resistance: $4,800 to $5,000 – the rounding top area and moving average confluence
• Support: $4,200 to $4,400 – the zone that absorbed the late-March flush and aligns with the rising long-term moving average

A break below the recent lows could open the door back to the $4,200 to $4,400 support zone. On the other side, any sustained reclaim of the $4,800 level, combined with a bullish moving average cross, could be the first signal that the potential top is invalidated.

The fact that gold is rolling over in a week of escalating Middle East tensions is arguably the most important takeaway from the chart. If the metal cannot catch a bid in a war, it could suggest that the macro drivers, not the geopolitical ones, are firmly in control of price right now.

Hourly chart

Zooming into the hourly, gold is trading within a clearly defined range between $4,660 as the range low and $4,870 as the range high. At the time of writing, price is pressing against the lower boundary of that range, which could make this a potential inflection point for the short-term structure.

The indicator picture is mixed. The Accumulation/Distribution line has broken its recent downtrend, which could suggest that buying interest is starting to return at these levels. The RSI, however, is still trading within its bullish range, holding above the 40 to 50 zone that typically defines a bullish momentum regime under Andrew Cardwell’s framework.

That mixed setup could make the current test of $4,660 a key level to watch. If the range low holds and the bullish A/D signal follows through, a move back towards the range highs at $4,870 could come back into play. If the range low breaks on a clean close below $4,660, the combination of a short-term breakdown and the daily rounding top could open the door to the $4,200 to $4,400 higher-timeframe support zone identified earlier.

The weekend adds an extra layer of risk to this setup. Any material development in the Iran situation, whether it is a further escalation or an unexpected breakthrough in negotiations, could trigger a gap at Monday’s open in either direction and potentially resolve the range test before any technical signal has time to confirm.

What to watch

• $4,660 hourly range low as the immediate level. A clean break could open the door to the $4,200 to $4,400 daily support zone
• $4,800 to $5,000 daily resistance. Any reclaim of this zone, combined with a bullish EMA cross, could be the first signal that the rounding top is invalidated
• The FOMC decision on 29 April. A hawkish tone could reinforce the macro chain pressuring gold, while any dovish shift could be the catalyst for a reversal
• Oil prices as the earliest signal in the transmission chain. A drop back below $100 on Brent could ease the inflation pressure keeping gold capped
• Weekend headline risk from Iran. Any material shift in the negotiation or escalation picture could drive a gap at Monday’s open

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