Gold Near Multi-Month Lows as Rate Views Offset USD Dip

Key Moments

Gold Stabilizes After Touching Late-March Lows

Gold (XAU/USD) continued to trade in a narrow consolidation range through the Asian session on Tuesday, staying close to the $4,268-$4,267 band that marked its lowest level since March 23 in the prior session. The metal’s latest stabilization followed an overnight bounce from those lows.

The US Dollar retreated from a more than two-month peak after Iran and Israel stated on Monday that they had halted attacks on each other, following an appeal from US President Donald Trump. This weakening in the greenback has been a key source of support for the precious metal. However, market participants have remained cautious, preferring to wait for clearer signs of progress on the broader Middle East situation before committing to stronger directional positions in gold.

Geopolitical Tensions Keep Risk Premium in Focus

Despite the halt in direct attacks, diplomatic talks between the United States and Iran remain stalled, with significant divisions over Tehran’s nuclear program. According to the article, Trump has emphasized that any peace agreement must ensure Iran is unable to develop a nuclear weapon.

At the same time, Iran is reported to be seeking several conditions: formal international recognition of its sovereignty and permanent control over maritime traffic through the Strait of Hormuz, the lifting of international sanctions, and the release of frozen assets. These unresolved issues are preserving a geopolitical risk premium in markets. That backdrop could continue to underpin safe-haven demand for the US Dollar, potentially limiting any substantial upside in gold prices.

Shipping flows through the Strait of Hormuz, described as a strategic chokepoint, remain heavily restricted. The resulting volatility in energy markets is fueling inflation worries and reinforcing expectations that central banks, including the Federal Reserve, may remain or become more hawkish. This environment is supporting elevated US Treasury yields and is acting as a headwind for non-yielding assets such as gold.

Fed Expectations and Key US Inflation Data in Focus

Market-based expectations, as reflected in CME Group’s FedWatch Tool, indicate that investors are assigning more than a 70% probability that the Federal Reserve will raise interest rates by year-end. Elevated US bond yields tied to these expectations are making it harder for US Dollar bears to build aggressive short positions, which in turn is capping gold’s upside.

Traders are also looking ahead to upcoming US inflation data. The Consumer Price Index (CPI) and Producer Price Index (PPI) releases for May are scheduled for Wednesday and Thursday, respectively. These reports are expected to be pivotal in shaping views on the Fed’s policy trajectory and therefore the outlook for the Dollar.

Alongside the macro data, incoming geopolitical developments are likely to continue driving volatility and short-term swings in XAU/USD. Still, the fundamental configuration described – firm yields, hawkish Fed expectations, and lingering geopolitical risk – suggests that the prevailing directional bias for gold remains skewed to the downside. Any rallies are therefore seen as vulnerable to selling and likely to face strong resistance.

Technical Picture: Bias Remains Bearish

On the technical front, last week’s decisive move below the 200-day Simple Moving Average (SMA) has been interpreted as a fresh bearish signal for gold. The subsequent decline has so far found some support near the lower boundary of a descending channel, around $4,270.16. Analysts are looking for a clear break below that channel support before gaining confidence in prospects for a more pronounced downside extension.

The Relative Strength Index (RSI) is hovering near 35, indicating weak momentum but not yet an oversold condition. At the same time, the Moving Average Convergence Divergence (MACD) indicator remains in negative territory, though with muted momentum, pointing to an ongoing advantage for sellers but without strong follow-through.

On the upside, any recovery efforts are expected to encounter firm resistance at the 200-day SMA, currently around $4,441.10. Bulls would need to reclaim this level to alleviate immediate downside pressure. Above that, the upper boundary of the descending channel, near $4,571.21, stands out as a significant technical barrier that could act as a cap within the broader bearish setup.