Gold Extends Three-Day Rally as Softer Fed Weighs on Dollar

Key Moments

Gold Holds Near Recent Highs as Rate-Hike Expectations Recede

Gold (XAU/USD) extended its rebound on Friday from the lowest price level since November 2025, reached earlier in the week, and drew continued buying interest for a third consecutive session. The metal climbed to a one-and-a-half-week high during Asian trading and stayed poised to deliver its first weekly advance in five weeks. Market participants were watching for a sustained push through the $4,200 area as a potential trigger for further upside positioning.

The move unfolded as investors scaled back expectations for additional interest rate increases by the US Federal Reserve following softer US labor market data released on Thursday. The non-yielding metal benefited from the shift in policy expectations and associated pressure on US yields and the Dollar.

US Labor Data and Fed Expectations Support Bullish Tone

The latest US Nonfarm Payrolls report showed that the economy added 57K jobs in June, falling short of the 110K consensus forecast. In addition, the prior month’s reading was revised down to 129K from 172K, while the Unemployment Rate ticked down to 4.2% in June.

Although the unemployment figure edged lower, the broader set of data pointed to a cooling labor backdrop. This came alongside moderating inflation concerns tied to a recent decline in Crude Oil prices, which together softened expectations for a prolonged period of elevated interest rates. Market pricing shifted from anticipating one to two Fed rate hikes in 2026 to expecting between zero and one increase.

The reassessment of the Fed’s path kept the US Dollar pinned near a two-week low, last seen on Thursday, and supported flows into gold. However, persistent geopolitical risks limited the extent of Dollar weakness.

Geopolitical Backdrop Tempers Dollar Losses and Gold Upside

According to The New York Times, US officials expressed concern that Israel might be planning to target Iran’s senior negotiators during indirect peace talks. The report added that officials believed any such move could derail negotiations and reignite conflict.

Separately, Iran’s military headquarters warned that any US intervention in the Strait of Hormuz would face a “decisive and swift response.” These developments sustained a geopolitical risk premium, which could lend support to the safe-haven US Dollar and simultaneously act as a headwind for additional sharp gains in gold.

Holiday-Thinned Trade, but Bias Remains in Favor of Bulls

Trading conditions on Friday were expected to be subdued, with US equity and bond markets closed for Independence Day. Even so, the prevailing fundamental backdrop – including the softer Fed outlook and recent technical improvement – remained skewed toward XAU/USD buyers and suggested scope for further near-term appreciation.

Against this setting, any short-term decline in gold prices was likely to attract dip-buying interest and could be limited in extent, given the constructive tone in both macro and technical signals.

Technical Picture: Break Above Key Levels Confirms Constructive Structure

On the 4-hour chart, gold buyers maintained control while the price held above the 100-period Simple Moving Average and the 23.6% Fibonacci retracement of the April-June decline. The intraday break above both the 100-period SMA and the 23.6% retracement bolstered the near-term bullish view for XAU/USD.

The Relative Strength Index hovered close to 68, approaching overbought territory, while the Moving Average Convergence Divergence indicator remained positive and continued to rise. Together, these momentum measures pointed to strong, albeit increasingly stretched, bullish momentum.

On the upside, the next resistance band was seen around the 38.2% Fibonacci retracement near $4,301.41. Above that, the 50% retracement sat around $4,411.75, followed by the 61.8% level near $4,522.09. Further out, the 78.6% retracement zone around $4,679.19 and the cycle high at $4,879.30 marked more distant barriers.

On the downside, initial support came in at the 23.6% retracement near $4,164.89, reinforced by the 100-period SMA around $4,142.90, which underpinned the immediate floor for prices. A more pronounced pullback could bring the broader structural base centered on the $3,944.21 region into view.