Gold Prices Lack Strong Bullish Conviction Near $4,200 as Fed Rate Hike Bets and Iran Risks Support US Dollar
Gold prices maintained a modest bid tone near the $4,200 level during the first half of the European session, appearing to snap a three-day losing streak after touching their lowest level in more than a week on the previous day.
The precious metal found some support as crude oil prices reversed lower after mediators from Qatar and Pakistan announced an official 60-day roadmap aimed at securing a final peace agreement between the United States and Iran.
XAU/USD Technical Analysis
From a technical perspective, last week's failed attempt to break above the 200-day Exponential Moving Average (EMA), which has now turned into a key resistance level, continues to favor bearish traders. The subsequent decline reinforces downside pressure on the XAU/USD pair.
Meanwhile, the Relative Strength Index (RSI) remains in the upper-30 range, signaling limited buying momentum. In addition, the Moving Average Convergence Divergence (MACD) indicator remains in negative territory with slightly negative histogram readings, suggesting that bearish momentum is easing but has yet to reverse.
The 200-day EMA near $4,334 now serves as the first major resistance level that bulls must reclaim to reduce the current bearish pressure. Until gold secures a daily close above this level, any recovery is likely to be viewed as a corrective rebound within a broader consolidation phase.
Momentum indicators continue to suggest that further downside tests cannot be ruled out in the near term.
Fundamental Overview
Market participants are currently pricing in nearly a 90% probability that the US Federal Reserve will raise interest rates before the end of the year.
These expectations strengthened after the Fed's hawkish projections last week indicated policymakers may need to tighten monetary policy further if inflation remains stubbornly elevated.
Adding to the outlook, newly appointed Federal Reserve Chair Kevin Warsh emphasized the importance of price stability during his post-meeting press conference, signaling that the central bank may be reluctant to cut interest rates even if economic growth slows.
At the same time, geopolitical developments over the weekend provided additional support for the US Dollar, limiting the upside potential for gold.
Iran accused the United States and Israel of violating the ceasefire agreement and announced the renewed closure of the Strait of Hormuz, citing continued Israeli military operations in Lebanon. Furthermore, US President Donald Trump threatened additional military action against Iran if Hezbollah continues attacks against Israel.
These developments highlight the fragile nature of the diplomatic process and keep geopolitical risk premiums elevated across global markets.
Meanwhile, Russia has intensified attacks on major Ukrainian cities in recent weeks, helping the safe-haven US Dollar hold near its strongest levels since May 2025. This has further capped gains in gold prices and warrants caution among bullish traders.
Market Outlook
Looking ahead, investor attention will remain focused on developments surrounding US-Iran negotiations, which are likely to continue driving volatility across global financial markets.
Comments from influential Federal Open Market Committee (FOMC) members will also be closely monitored for additional clues regarding the Federal Reserve's policy path, potentially influencing demand for the US Dollar and precious metals.
However, the prevailing fundamental backdrop suggests that any recovery attempts in gold may continue to attract selling interest and could struggle to gain sustained momentum.
