Gold Falls as Dollar and Yields Rise on Inflation Fears

Key Moments

Gold Softens as Inflation Fears Resurface

Gold (XAU/USD) remains under selling pressure heading into the European session on Tuesday, though it continues to hold above the $4,100 level. The metal is confronting renewed headwinds as rising crude oil prices stoke inflation concerns, which in turn are driving another move higher in U.S. Treasury bond yields. The uptick in yields is providing support to the U.S. Dollar and weighing on the non-yielding metal for a second consecutive session.

At the same time, diminishing expectations for further interest rate increases by the U.S. Federal Reserve are preventing a more decisive advance in the Greenback, helping to cushion gold from a deeper immediate decline.

Hormuz Tensions Boost Oil and Inflation Concerns

Geopolitical risks in the Strait of Hormuz remain elevated as Tehran seeks to reinforce its strategic influence over the key maritime chokepoint and pursue fees from vessels passing through the route. Iran maintains that the fees relate to security, vessel supervision, and environmental protection rather than toll collection, despite firm resistance from the United States.

Adding to the uncertainty, a maritime agency reported that an oil tanker was hit by an unidentified projectile while moving through the strait. The incident complicates an already fragile peace process between the U.S. and Iran and lends support to crude oil prices, reinforcing the market’s focus on potential inflationary pressures.

Fed Expectations Ease After Soft U.S. Data

The latest U.S. labor market data have contributed to a reassessment of the Fed’s policy path. A softer-than-expected June Nonfarm Payrolls (NFP) report has reduced the market’s conviction that the central bank will need to raise borrowing costs further. Traders have shifted from anticipating one to two rate hikes in 2026 to pricing in between zero and one additional move.

This repricing has kept U.S. Dollar bulls on the back foot and may deter market participants from making aggressive downside bets on gold. On the data front, the U.S. ISM Services PMI slipped to 54.0 in June from 54.5 previously, in line with expectations, and did little to change sentiment toward the currency.

Market Focus Turns to FOMC Minutes

Against this backdrop, investors appear reluctant to establish strong directional positions and prefer to await clearer signals on the Fed’s outlook. Attention now turns to the release of the FOMC Minutes on Wednesday, which could provide additional guidance on policymakers’ thinking.

Developments on the geopolitical front will also be closely monitored for their impact on U.S. Dollar demand and, by extension, gold prices. For now, the fundamental setup suggests it may be prudent to wait for a more convincing break lower to confirm that the recent rebound from last week’s year-to-date low has lost momentum.

Technical Picture: Bias Still Favors Sellers

The XAU/USD pair retains a bearish short-term posture while trading below the 200-day Simple Moving Average (SMA) at $4,489.97 and remaining confined within a descending channel. Nevertheless, the Moving Average Convergence Divergence (MACD) indicator has turned positive, with the MACD line above the signal line and an expanding positive histogram. This points to a recovery in bullish momentum, although it is not yet sufficient to overturn the prevailing downside structure.

The Relative Strength Index (RSI) stands at 44.16, still under the 50 threshold, implying that the market tone is neutral to slightly bearish despite the latest bounce.

Key Technical Levels for XAU/USD

From a levels perspective, the $4,100 area is acting as initial support and could serve as a near-term floor. A decisive break below this region would expose more substantial support at the lower boundary of the descending channel around $3,844.34, where demand is expected to be stronger.

On the upside, immediate resistance is seen at the top of the descending channel, close to $4,296.64, a zone where any recovery may first encounter selling interest. Above that, the 200-day SMA at $4,489.97 represents a significant technical hurdle, followed by a higher structural barrier near $4,572.41.