XAU/USD holds Monday’s gains near $3,950 on US-Iran deal hopes

• Gold price trades close to its Monday’s high of around $3,950 amid lower oil prices.
• US officials have signaled that President Trump prefers negotiation with Iran.
• Investors keenly await US Midterm elections and key economic releases.

Gold clings to previous day’s recovery around $3,945 in the Asian trade on Tuesday, as hopes of a deal between the United States (US) and Iran have kept oil prices under pressure. Still, the Gold price is close to its yearly low of $3,870.23 posted on Friday.

As of writing, the WTI Oil price holds onto previous day’s losses near $95.00. Oil prices have retreated significantly from its five-month high of $104.03 posted on Friday.

Theoretically, a period of correction in oil prices anchors inflation expectations. Such a scenario diminishes fears of prolonged higher interest rates by central banks. This bodes well for non-yielding assets, such as Gold.

Remarks from several United States (US) officials have indicated that President Donald Trump is more interested in making a deal with Iran, and not resuming military action.

Over the weekend, US Secretary of State Marco Rubio said that Washington hasn’t made any decision to renews strikes on Tehran and that President Donald Trump prefers a diplomatic resolution.

On Monday, US Vice President JD Vance told that he just spoke to President Trump about talks with Iran and said “the president and I both feel pretty good about the prospects for potentially coming to a negotiated settlement,” The Associated Press (AP) reported.

Meanwhile, Iran’s Islamic Revolutionary Guard Corps (IRGC) has reported that that two US MQM-170 drones were intercepted and brought down south of Qeshm Island in the Strait of Hormuz, while the 55th US MQ-9 drone east of the Hormuz Strait was destroyed. However, there seems to be no meaningful impact of the attack on oil prices.

ING’s Chris Turner flags the US midterm elections as the key event risk for FX this week, noting that betting markets now give the Democrats a “70-72% chance of taking both the House and the Senate.” He argues that a Democrat clean sweep would likely “lead to gridlock on the debt ceiling, a prolonged government shutdown next year and could encourage President Trump to pursue an even more activist foreign policy agenda.”

Later in the day, investors will focus on the US JOLTS Job Openings data for September, which will be published at 15:00 GMT. According to estimates, US employers posted 7.13 million fresh jobs, slightly higher than 7.097 million in August.

In the daily chart, XAU/USD trades at $3,935.94, keeping a bearish near-term bias as price holds below the 20-period Exponential Moving Average (EMA) at $4,063.86. The metal remains capped by this short-term trend indicator, suggesting upside attempts are vulnerable while sellers stay in control.

The Relative Strength Index (14) at 36.24 sits just above oversold territory, hinting at weak but persistent downside pressure rather than a decisive exhaustion of the move.

On the topside, initial resistance is located at the 20-period EMA at $4,063.86, and a daily close above this barrier would be needed to ease immediate bearish pressure and open the way for a more sustained recovery. Looking down, the yearly low at $3,870.23 is the critical support level; a decisive break below the same would expose Gold price to $3,800, followed by $3,700.