Gold Edges Up From Multi-Month Low as Fed Caps Upside

Key Moments

Middle East Tensions Support Gold, but Fed Outlook Weighs

Gold (XAU/USD) is recovering part of its recent losses on Monday after falling to its weakest level since March, as market participants react to renewed geopolitical developments in the Middle East. The bounce remains limited as a still-hawkish Federal Reserve (Fed) outlook continues to restrain the upside.

At the time of writing, spot gold is trading around $4,330 after touching an intraday low of $4,268, a level last reached on March 23.

Iran and Israel exchanged fire over the weekend for the first time since a ceasefire was announced in April. The escalation has reduced expectations for a near-term peace agreement in the region.

US President Donald Trump attempted to cool tensions, writing on Truth Social that, “Both sides, Israel and Iran, are looking to do an immediate CEASEFIRE! Final negotiations on ‘Peace’ are proceeding.”

Trump also stated that the US naval blockade of Iranian ports would stay “in full force and effect” until a final deal is achieved.

Separately, Iran’s armed forces declared an end to military operations against Israel, according to Fars News Agency, while signaling it would deliver a stronger response to any further Israeli strikes on Lebanon.

Dollar Pullback Offers Limited Relief to Bullion

In the aftermath of these developments, the US Dollar Index (DXY) reversed earlier gains, providing some marginal support to dollar-priced gold. The DXY, which measures the US currency against a basket of six major peers, is trading around 99.94 at the time of writing, after previously rising to 100.21, its highest level since early April.

Market participants remain focused on potential economic spillovers from the conflict, as higher crude oil prices have intensified inflation concerns and increased the perceived likelihood of further interest rate hikes from major central banks, especially the Fed.

Recent US data have reinforced that narrative. Stronger-than-expected Nonfarm Payrolls (NFP) figures released on Friday have bolstered expectations that the Fed can maintain elevated borrowing costs for an extended period.

According to the CME FedWatch Tool, traders now assign a 38% probability to a 25-basis-point (bps) hike at the September policy meeting, up from 22% one week earlier.

Gold is commonly viewed as a hedge against inflation and geopolitical risk. However, rising interest rates typically pressure the metal, as it does not pay interest or dividends.

Market attention will now turn to upcoming US inflation data due later this week, alongside continued monitoring of the Middle East situation.

Technical Picture: Downtrend Intact as XAU/USD Trades Below Key Averages

On the daily time frame, XAU/USD retains a bearish short-term bias with spot trading beneath its main moving averages. The Relative Strength Index (RSI) is around 34, indicating soft momentum moving closer to oversold territory, while the Average Directional Index near 28 points to a moderately established downtrend rather than an aggressive liquidation phase.

On the upside, initial resistance comes in at the 200-day Simple Moving Average (SMA) near $4,436, and a daily close above that level would be required to ease immediate downside pressure. If buying momentum builds, subsequent resistance is located at the 50-day SMA around $4,624, followed by the 100-day SMA near $4,793, where the broader bearish setup would likely come under scrutiny.

On the downside, the next key support is situated around the horizontal area near $4,100. A decisive break below that region would leave the metal vulnerable to further declines.