Gold Slips as Fed Outlook Boosts Dollar, Curbing Losses

Key Moments

Gold Under Pressure as Dollar Stays Firm

Gold prices came under renewed selling pressure on Thursday, with XAU/USD moving lower during early European trading and giving back part of the prior session’s modest rebound from the $4,450 region. That area marked the weakest level since March 30. The pullback in the metal is occurring against a backdrop of firm US Dollar strength, driven by expectations that US interest rates could rise again.

The latest Federal Open Market Committee (FOMC) Minutes, released on Wednesday, strengthened the likelihood of another rate increase before the end of the year. This has kept the US Dollar close to a six-week peak, weighing on demand for non-yielding assets such as Gold. At the same time, the downside in Gold remains contained, as market participants appear reluctant to press bearish positions aggressively while geopolitical risks in the Middle East remain unresolved and signals over a possible US-Iran peace agreement stay mixed.

Fed Minutes Reinforce Hawkish Rate Expectations

The Minutes from the Federal Reserve’s April 28–29 policy meeting showed that most officials judged that additional policy firming would likely be warranted if inflation continued to run persistently above the 2% objective. Policymakers broadly agreed that inflation risks were tilted to the upside and acknowledged that developments in the Middle East could significantly shift the balance of risks and complicate the appropriate policy path.

Market pricing reflected this hawkish tone. According to the CME Group’s FedWatch Tool, investors are factoring in more than a 50% probability that the Fed will raise interest rates by 25 basis points in 2026. This outlook has helped slow the US Dollar’s corrective move lower, which had been triggered earlier by renewed optimism over a de-escalation in tensions with Iran.

US-Iran Negotiations Support Risk Sentiment but Keep Tensions Elevated

Hopes for progress on US-Iran negotiations contributed to an improvement in risk appetite. US President Trump said on Wednesday that the US is in the “final stages” of talks with Iran. In parallel, US Vice President JD Vance “also struck an optimistic tone and stated that Iran wanted to make a deal.” The prospect of a diplomatic breakthrough lifted investor confidence, temporarily undermining the Greenback’s safe-haven appeal and offering some support to Gold.

However, that optimism remains constrained by President Trump’s warning of potential further military action if Iran does not agree to a peace deal. Iran, in turn, criticized the threat and cautioned against renewed US and Israeli attacks, arguing that any such action could significantly intensify the conflict.

Skepticism persists over the likelihood of a durable US-Iran accord amid substantial disagreements surrounding Tehran’s nuclear program and a standoff in the strategically vital Strait of Hormuz. Iran has launched a new “Persian Gulf Strait Authority” to manage traffic through the key waterway. These developments keep geopolitical risks elevated, which in turn help limit downside in the US Dollar and cap any meaningful upside in Gold prices, prompting caution among bullish traders.

Technical Picture: Bears Maintain Short-Term Edge

From a chart perspective, XAU/USD continues to trade with a mild bearish bias inside a descending parallel channel and remains clearly below the upper boundary near $4,682.12. The Relative Strength Index (14) stands at 46.60, having recovered from oversold levels but still signaling only neutral-to-soft momentum rather than a strong trend.

At the same time, the Moving Average Convergence Divergence (MACD) indicator has turned slightly positive, pointing more toward a corrective recovery phase within a broader decline rather than confirmation that the bearish move has fully ended.

On the upside, initial resistance is seen at the prior channel reference near $4,632.58, with stronger selling interest expected around the upper channel boundary at $4,682.12. That region is anticipated to limit rallies unless it is convincingly cleared. On the downside, the $4,500 area represents the closest psychological and tactical support. A sustained move below that level would bring focus on the channel floor near $4,380.81, where dip buyers could attempt to rebuild a more solid base.