Key Moments
- Gold (XAU/USD) trades below $4,700 and keeps a bearish tone as the US Dollar extends gains.
- Meanwhile, tensions around Iran and risks in the Strait of Hormuz continue to support USD demand.
- In addition, expectations for delayed Federal Reserve rate cuts weigh on non-yielding bullion.
Macro Drivers Pressure Gold Prices
Gold (XAU/USD) remains below $4,700 and stays under pressure ahead of Thursday’s European session. Overall, the tone is negative as the US Dollar (USD) extends its rally for a third straight day.
At the same time, ongoing tensions between the US and Iran support the Greenback. The US naval blockade and risks around the Strait of Hormuz add to uncertainty. Moreover, fading expectations for Fed rate cuts further boost the USD and reduce Gold’s appeal.
Geopolitical Tensions Support the Dollar
Earlier this week, US President Donald Trump extended the Iran ceasefire shortly before its expiration. However, markets remain cautious about a lasting resolution.
Talks have stalled, and tensions around the Strait of Hormuz persist. In addition, the US Navy blockade remains in place. Iran has made its removal a key condition for new negotiations.
Furthermore, the Islamic Revolutionary Guard Corps (IRGC) reported seizing two container ships on Wednesday. This marks its first such move since February. As a result, escalation risks remain high, supporting the USD’s safe-haven demand.
Inflation Concerns and Fed Repricing Weigh on Bullion
At the same time, disruptions to energy flows keep Crude Oil prices elevated. Consequently, global inflation pressures remain firm.
This trend reinforces expectations that central banks may stay cautious. In particular, the Federal Reserve could delay easing. Although officials still project one rate cut this year, strong data and persistent inflation raise the bar.
Therefore, the Fed may adopt a wait-and-see approach. This supports the USD and reduces demand for non-yielding Gold. For now, traders look for a clear break below $4,700 before targeting deeper losses.
Technical Picture: XAU/USD Near Channel Support
On the 4-hour chart, Gold trades near the lower boundary of an upward channel. This suggests a neutral short-term structure.
The Relative Strength Index (RSI) sits near 39, pointing to weakening momentum. However, it does not yet signal oversold conditions. Meanwhile, the MACD remains in negative territory, which may limit recovery attempts.
If price breaks below $4,691, selling pressure could accelerate toward $4,568. On the other hand, a move above $4,926 would shift momentum back to the upside.
| Key XAU/USD Technical Levels | Level | Implication |
|---|---|---|
| Immediate support (channel floor) | $4,691 | A break lower may trigger deeper downside |
| Prior structural base | $4,568 | Next target if selling intensifies |
| Channel resistance | $4,926 | A close above could restore the uptrend |
Federal Reserve and the US Dollar: Key Concepts
Fed Mandate and Dollar Impact
The Federal Reserve (Fed) manages monetary policy in the US. It aims to ensure price stability and full employment.
To achieve this, the Fed adjusts interest rates. When inflation rises above 2%, it increases rates. As a result, borrowing costs rise and the US Dollar strengthens.
Conversely, when inflation falls or unemployment rises, the Fed may cut rates. This encourages borrowing and typically weakens the USD.
Fed Meeting Schedule
The Federal Reserve holds eight meetings per year. During these sessions, the Federal Open Market Committee (FOMC) reviews economic conditions and sets policy.
The committee includes twelve members. These consist of the Board of Governors, the New York Fed president, and rotating regional presidents.
Quantitative Easing (QE)
In times of crisis, the Fed may use Quantitative Easing (QE). This policy increases liquidity in the financial system.
Specifically, the Fed buys bonds using newly created money. As a result, credit flows more easily. However, QE typically weakens the US Dollar.
Quantitative Tightening (QT)
Quantitative Tightening (QT) is the opposite of QE. In this case, the Fed reduces its balance sheet.
It stops buying bonds and allows holdings to mature without reinvestment. Therefore, liquidity declines, which usually supports the US Dollar.
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