Gold Retreats as Stronger Dollar Weighs on Prices

Key Moments

Geopolitical Tensions Bolster Dollar, Pressure Gold

Gold (XAU/USD) comes under renewed selling pressure after climbing in Asian trading to levels above $4,200, marking a two-week peak and halting a three-session winning run. The US Dollar benefits from safe-haven inflows as tensions surrounding the Strait of Hormuz remain elevated, weighing on the metal.

Despite an interim US-Iran understanding described as fragile, the situation in the strategic waterway stays tense as Iran moves to tighten control. Iran’s ambassador to China said on Saturday that Tehran plans to introduce new service fees for ships transiting the key route. The United States has rejected the proposal that Iran charge vessels for passage through the strait.

This backdrop keeps a geopolitical risk premium in place and supports renewed demand for the Greenback at the start of the week, which in turn exerts pressure on Gold.

Fed Expectations and Central Bank Buying Limit Gold Downside

At the same time, the upside in the US Dollar appears constrained. Market participants have scaled back expectations for additional interest rate increases by the Federal Reserve after weaker-than-expected US monthly jobs data released last Thursday pointed to cooling labor conditions.

Softening inflation concerns, helped by the recent drop in Crude Oil prices, could allow the Fed to maintain a more patient stance and temper expectations for a prolonged higher-for-longer rate path. This dynamic may discourage aggressive USD buying and, as a result, limit the depth of any correction in Gold.

In addition, sustained central bank demand continues to provide a constructive backdrop for the non-yielding metal. A World Gold Council survey released last week indicated that central banks are increasingly turning to Gold as protection against financial crises, inflation, and geopolitical risks. Nearly 90% of respondents expect global central bank gold reserves to rise over the coming year.

Supporting this trend, the latest reserve data from the European Central Bank (ECB) showed that Gold has officially surpassed US Treasuries in global reserve allocations. Meanwhile, the People’s Bank of China (PBoC) added another 320,000 ounces of Gold in May, marking the 19th consecutive month of increases in its Gold holdings.

Data, Fed Speak and Near-Term Bias for XAU/USD

Looking ahead, traders are focused on US economic data, with the ISM Services PMI on the calendar. In addition, remarks from key Federal Open Market Committee (FOMC) officials later in the North American session are expected to influence USD demand and could provide fresh direction for Gold.

Even so, the current fundamental mix suggests that the broader bias for Gold remains tilted to the upside. The latest pullback is expected to attract dip-buying interest and remain relatively shallow, making it premature to conclude that the recent rebound from the year-to-date low has fully exhausted.

Technical Picture: Key Levels on the XAU/USD 4-Hour Chart

On the 4-hour chart, Gold is hovering near the 100-period Simple Moving Average (SMA) in the $4,150-$4,145 band, after Friday’s decisive break above this moving average and a subsequent move through the 23.6% Fibonacci retracement of the April-June decline.

These developments provided important confirmation for bullish momentum in XAU/USD. The Relative Strength Index (RSI) remains elevated around 63, and the Moving Average Convergence Divergence (MACD) indicator continues to show a positive reading, both suggesting that upside momentum is still constructive even as price consolidates below the recent highs.

Gold: Support and Resistance Landscape

Short-term weakness below the 23.6% Fibonacci retracement near $4,164 is expected to encounter initial support around the 100-period SMA, which is seen offering a floor close to $4,147. A clear break beneath this area would open the door toward the structural low region at $3,940.

On the upside, Gold faces immediate resistance at the 38.2% retracement around $4,302. Above that, additional barriers are located at the 50% level near $4,415 and the 61.8% retracement around $4,527. Further gains would bring the 78.6% Fibonacci level at $4,686 into focus, which defines the broader bullish extension zone ahead of $4,889, corresponding to the April swing high.