- Gold is currently "coiled" in a narrowing wedge between long-term D1 resistance and short-term H4 support.
- While a hawkish Fed supports the USD, "War Premium" from Middle East tensions and "Tariff War 2.0" are keeping gold prices elevated.
Now the gold market is like a pressure cooker. After a brutal four-week rally, however, XAU/USD is now in high stakes consolidation mode, grinding sideways at levels just below $5200 handle. Structurally, a bullish trend looks intact but price action on the H4 and daily suggest we are seconds away from a volatile “make-or-break” situation.
As the North American session approaches, the market remains stuck between the rock and hard place with hawkish Federal Reserve giving way to floor under the US dollar only to see events on the geopolitics front worsen enough that gold bulls are never able to back off.
Technical Breakdown: The Convergence of Trends
Figure 1: The image above shows the support and resistance level of XAU/USD on 4-hour chart (Source: TradingView)
But the underline geometry at my current charting setup is telling us a story that has not reached our ear. We are out of a trending environment and in the “squeeze”.
Resistance Barrier (The Black D1 TL) The most significant level that can be seen on the chart at this moment is the daily black trendline. This declining line has served as a multi-month protector of the bearish story. Gold is hovering around this line, challenging sellers. A close above the trendline on the daily would give a massive technical signal, basically confirming that a long-term bear cycle is over. The short-term target here is Resistance Level 1 (red dashed line) at $5225 . The next key marker is (Resistance Level 2) at $5378 shown by the green arrow. If the bulls can hurdle that level, it becomes a clear high probability destination.
Support Level (Red H4 TL) On the other hand, a series of higher lows is being formed as we are supported by the H4 Trendline (Red). This represents the short-term momentum. So long as gold holds above this diagonal support, the “ by the dip” mindset is still the prevailing trade. However a failure, there to drive the focus right onto support level $5108 (black dashed line). A drop below this level (marked by the red arrow) would likely activate a cascade off stop loss orders and lead to a deeper correction pull back towards $5000 psychological support.
Analyst’s Note: Price is currently trapped in this Apex of these two lines. By that, this kind of construction tends to happen ahead of explosive widening in volatility. We are staring at a coiled spring.
Fundamental Context: Trump, Tariff, and the Fed
If the charts are providing the map, then the fundamentals are providing the fuel. So, the main reason gold is not crashing in the face of a strong US dollar is the sheer volume of uncertainty coming out of Washington and the Middle East.
President Trump’s recent State of the Union address has effectively placed the market on the war footing. By making clear that the US will not accept a nuclear-armed Iran, he has put back into gold prices an important “war premium”. And even if talks of additional nuclear discussion take place, the overwhelming naval and air presence in the region suggests that any de-escalation is tenuous at best.
In addition, “ Tariff War 2.0” is very much back on the front burner. The flip-flopping between 10% and 15% tariffs on non-exempt goods in the wake of the Supreme Court ruling has engendered a supply-chain anxiety that is bread-and-butter to hard assets. Investors are holding onto gold because they do not know what the trading environment will be tomorrow morning.
But we cannot overlook the “Fed Elephant” in the room. January FOMC minutes were cold water for aggressive rate cut priced in. What has kept USD feeling steady at the upper end of its monthly -lying range has been that officials even quietly mentioned lifting rates should inflation be sticky. It is the only thing keeping gold from already sitting at $5300.
What to Watch Today: The PPI Catalyst
The US Producer Price Index (PPI), release today is the last piece of this week’s puzzle. If the PPI is hotter than expected, we have a validation of the Fed’s hawkishness, and expect to see the USD surge with gold testing $5108.
Or a cool PPI print will be the “ green light” bulls were waiting for. It would indicate that inflationary pressures at a factory level are calming down, which will give the Fed some breathing space and let gold finally breakthrough that D1 black trendline.
The Bottom Line
We remain cautiously bullish but not buying at the price of $5190. The risk to reward ratio does not favor buying, and it would be better to wait for a confirm the breakout.
Long Scenario: buy on sustained break above $5210 (H4 close), targeting $5225 and finally $5378.
Short Scenario: A strong PPI print sees us lose the red H4 support line, moving quickly to $5108 where we would expect heavy buying interest to return.
The market is coiled. The news is loaded. Keep an eye on the $5200 level — It is the line in sand for the next $100 move.
Frequently Asked Questions
It is the “battleground? where long-term D1 resistance (black line) meets current market sentiment. A clear break above $5200 would also be a significant transition from a bearish long-term cycle to a bullish one, which could trigger gigantic buy orders towards the region of $5378.
Stronger-than-expected PPI data points to stubborn inflation —keeping interest rates high. Gold earns no interest, so a surging US dollar driven by hawkish Fed expects will likely support prices lower to test the $5180 support level.
The current “floor” of the uptrend is the red H4 TL. If gold closes below this line, its is confirmed that the “squeeze is broken to the downside means geopolitical fears are not enough to hold up rally more, and deeper correction toward $5k is inevitable.