As the XAU/USD chart shows, gold prices today dropped below the 3 March low, reaching levels last seen in the third week of February.

Why Is Gold Declining Despite the War?

Geopolitical turmoil typically supports demand for gold as a safe-haven asset. However, in the current environment — with the Middle East conflict now lasting more than two weeks — the surge in oil prices and the associated inflation risks have moved to the forefront.

Market participants appear to believe that the Federal Reserve will keep interest rates higher for longer. This increases the attractiveness of US dollar-denominated instruments, particularly US Treasuries and money market assets. Rising yields on US government bonds confirm this shift in expectations and simultaneously weigh on gold, which does not generate interest income.

Technical Analysis of XAU/USD

On the morning of 10 March, while analysing gold price movements, we confirmed that the long-term ascending channel remains in effect and also:

→ suggested that its lower boundary could provide support for gold prices;
→ noted that an important test of bullish momentum could come at the breakout level of the purple channel, near $5250.

As indicated by the arrow, the XAU/USD chart showed a continuation of the bullish impulse later that same day. However, the move lost momentum around $5235, forming peak A, after which a sequence of lower highs and lower lows (A–B–C–D–E) developed.

At the same time:

→ the lower boundary of the long-term rising channel was broken following a weak rebound from B to C;
→ a descending channel (shown in red) has now become relevant;
→ the $5060 level may act as an important resistance area, where sellers were strong enough to break the local support S and push gold prices into the lower half of the red channel.

If bears continue to maintain control, the price of an ounce could decline towards the lower boundary of the red channel.

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