Gold (XAU/USD) is trading with a strong bullish bias today, approaching the upper boundary of its monthly trading range. Renewed optimism over a potential agreement between the United States and Iran, along with the possible reopening of the Strait of Hormuz, has reduced expectations of further monetary policy tightening by the U.S. Federal Reserve. As a result, U.S. dollar bulls remain on the defensive, providing key support for the precious metal, which is advancing for the second consecutive session.
Despite mixed signals, market participants continue to expect a diplomatic resolution to the five-month conflict between the United States and Iran. In addition, U.S. Treasury Secretary Scott Bessent stated that Washington could reach an agreement with Iran on reopening the Strait of Hormuz as early as Wednesday, paving the way for a more normalized resolution of the confrontation. Separately, Axios, citing sources familiar with the matter, reported that the United States, Iran, and Oman are close to reaching an interim agreement on restoring operations along this strategically important waterway.
Meanwhile, OPEC+’s decision on Sunday to increase oil production starting in September has eased supply concerns and pushed oil prices to their lowest level since June 13. This, in turn, has reduced inflationary pressures and tempered expectations of a more hawkish Federal Reserve, weighing on the U.S. dollar while supporting gold.
However, traders continue to price in a high probability that the Federal Reserve will raise interest rates before the end of the year, supported by signs of stabilization in the U.S. labor market.
Data released on Tuesday by the U.S. Bureau of Labor Statistics in the Job Openings and Labor Turnover Survey (JOLTS) showed that the number of job openings declined slightly to 7.36 million but remained above last year’s levels. In addition, Kansas City Federal Reserve President Jeff Schmid and Philadelphia Federal Reserve President Anna Paulson expressed support for further monetary policy tightening and additional rate hikes to combat inflation.
This may discourage U.S. dollar bears from opening aggressive positions, as attention remains focused on the official employment data—the Nonfarm Payrolls (NFP) report, which is scheduled for release on Friday. The key event on this week’s economic calendar will be the July Nonfarm Payrolls report, with current market expectations pointing to approximately 80,000 new jobs. According to these estimates, only moderate monthly job growth is currently needed to prevent an increase in the unemployment rate, while the labor market’s breakeven pace is unlikely to be significantly above 50,000 jobs per month, if it exceeds that level at all. Moreover, maintaining a stable unemployment rate no longer requires substantial job growth because labor force growth has slowed considerably compared with the pre-pandemic period.
To identify short-term trading opportunities, traders should closely monitor upcoming U.S. economic data during the North American session, including the ADP private employment report and the ISM Services Purchasing Managers’ Index (PMI). In addition, further developments related to the Middle East crisis could also serve as catalysts for movements in both the U.S. dollar and gold.
Overall, the fundamental backdrop remains supportive for XAU/USD bulls and continues to favor further intraday gains.
From a technical perspective, the intraday breakout above the 50-day Simple Moving Average (SMA) supports a bullish outlook. At the same time, the Relative Strength Index (RSI) has moved into positive territory, indicating sustained bullish momentum. Therefore, the technical picture currently appears to have shifted in favor of the bulls, reinforcing the potential for further gains.
