Gold (XAUUSD) Technical Analysis: Strong Dollar Caps Upside Despite US-Iran Tensions

Gold (XAU) reacted quickly when the United States and Israel carried out strikes on Iran on Feb. 28. The spot gold prices increased from from $5,275 to $5,419 an ounce as investors shifted to safe-haven assets. However, the rally did not last for long. The selling pressure was so great that gold dropped more than 5% to $4,996 by March 3. Since then, the market has been trading in a narrow range of $5,050 to $5,200. This consolidation indicates that the conflict has not caused a sustained rally at this point.

A stronger US dollar and rising yields on Treasuries have limited demand for precious metals. Higher oil prices are also causing worries about persistent inflation. If energy prices keep rising, central banks may keep interest rates higher for longer period. Higher interest rates would benefit interest bearing assets such as government bonds and decrease the relative attractiveness of gold.

Market behavior in times of crisis is also a factor in the recent volatility. Some institutional investors have become nervous because gold has been moving strongly in recent months. In times of financial stress, investors will sell even safe-haven assets in order to raise cash. This kind of liquidity squeeze can drive gold lower for a period. However, any correction in gold will likely find support for the next move higher.

Gold Technical Analysis

XAUUSD Daily Chart – Ascending Broadening Wedge

The daily chart for spot gold shows strong consolidation above $5,000, which is considered a key level. A break below $5,000 will indicate further downside towards $4,800. Despite this consolidation, the overall picture remains bullish, as the price is consolidating within ascending broadening wedge pattern.

If this pattern holds, the next move in the gold market may be higher. However, a break below $4,400 will indicate further downside towards the $4,000 area.

XAUUSD 4-Hour Chart – Positive Development

The 4-hour chart for spot gold also shows strong consolidation in the short term as the price is hovering above $5,000-$5,100. A break below $5,000 will trigger a strong drop towards $4,770. These consolidations are normal after strong rally in 2024 and 2025. However, the price is now stabilizing for next move.

A break above $5,400 is required to gain further traction towards $5,600. However, if price fails to hold $5,000, gold prices will likely drop further.

US Dollar Technical Analysis

US Dollar Index Daily Chart – Positive Traction

The daily chart for the US Dollar Index shows strength after hitting the long-term support of 96.50 on 27 January 2026. Despite the breakout of the US Dollar Index in January 2026, prices reversed sharply higher and broke the 200-day SMA at 98.40. The strength of the US Dollar Index is seen due to strong oil prices caused by the Middle East conflict.

Despite this strength, the US Dollar Index remains in strong consolidation between 96.50 and 100.50. A break above the 100.50 level is required to break this consolidation and take the index towards the 102 level.

US Dollar Index 4-Hour Chart – Consolidation

This consolidation in the US Dollar Index is also observed on the 4-hour chart, and the index is approaching 100.50 as the initial resistance of this rally. A breakup of 100.50 will take the index towards the 102 level. However, if the index fails to hold the 98 level, this will take the index towards the 96.50 level. A break below 96.50 is required to take the index towards the 90 level.

Bottom Line

Gold is still in consolidation pattern as markets react to geopolitical risks, higher oil prices and a stronger US Dollar. The metal has held firm above $5,000 in the face of recent volatility which indicates that the broader bullish structure is intact. In the short term, movement in US dollar and Treasury yields is likely to continue to affect gold prices. A stronger dollar could restrict further upside and easing yields could help to drive renewed buying interest.

From a technical point of view, recent consolidations are normal following strong rally in 2024 and 2025. As long as gold continues to hold above $5,000, the overall trend is still constructive and market may prepare for next upward move. A breakout above $5,400 could open the door towards $5,600. However, if the price drops below $5000, then deeper correction towards $4800 or lower is possible before longer term bullish trend resumes.

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