Gold Holds Above $4,000 Amid Fed Rate Pressure

Key Moments

Gold Steadies Near $4,000 as Recovery Momentum Fades

Gold (XAU/USD) is holding modest gains near the $4,000 psychological level ahead of the European session on Friday. However, buying momentum remains weak. The metal is trading close to its monthly low and remains vulnerable to renewed selling pressure.

Meanwhile, crude oil prices have jumped more than 10% this week as US-Iran tensions escalate and supply risks increase. As a result, inflation concerns have returned. This has strengthened expectations that the Federal Reserve will keep interest rates higher for longer. Such a scenario supports the US Dollar and weighs on non-yielding assets like gold.

US-Iran Tensions Raise Energy and Inflation Concerns

The US-Iran conflict has entered a more dangerous phase after both sides increased military strikes on Thursday. Iran expanded its attacks beyond traditional military targets. Officials in Bandar Abbas, southern Iran, said strikes hit civilian infrastructure, including power facilities and a train station.

In response, Iran launched missile and drone attacks against US-allied Gulf states. At the same time, tensions increased around the Strait of Hormuz. US forces have intercepted commercial vessels that allegedly attempted to break a naval blockade around Iran.

Furthermore, Iran’s Islamic Revolutionary Guard Corps warned that it could target more regional energy routes. Reuters reported that Iran asked Yemen’s Houthis to prepare for a possible closure of the Red Sea oil route. Consequently, crude benchmarks remain near one-month highs and continue to fuel energy inflation concerns.

Strong US Data and Hawkish Fed Signals Support Dollar

Recent US economic data has reinforced expectations for a resilient economy and persistent inflation pressures. On Thursday, the US Labor Department reported that initial jobless claims fell to 208,000 for the week ended July 11. The figure came below expectations and highlighted continued labor market strength.

Additionally, the Philadelphia Fed Manufacturing Index rose from 10.3 to 41.4 in July. This marked its highest level since November 2021 and showed stronger regional manufacturing activity. The survey also indicated that price pressures remained elevated.

Federal Reserve officials also maintained a hawkish stance. Dallas Fed President Lorie Logan said recent improvements in consumer and wholesale prices were still not enough to provide meaningful relief for US households. She supported slightly higher interest rates to address ongoing inflation challenges.

Fed Vice Chair Philip Jefferson added that he would consider raising rates if inflation fails to improve in the near term.

According to the CME Group’s FedWatch Tool, traders currently see nearly a 75% chance of a 25-basis-point Fed rate increase by December. Therefore, the outlook continues to support the US Dollar and limit gold’s safe-haven appeal.

Event Risk Ahead: US Data and Fed Comments in Focus

Firm US data, higher energy prices, and hawkish Fed signals suggest that any short-term XAU/USD recovery could attract sellers. As a result, traders are watching Friday’s US releases, including Building Permits, Housing Starts, Industrial Production, and the University of Michigan Consumer Sentiment Index.

Moreover, upcoming Fed comments and economic data will likely shape US Dollar movements and influence gold prices. For now, the metal remains on track for a second consecutive weekly decline.

Technical Outlook: Downtrend Remains Below 200-Day SMA

From a technical perspective, XAU/USD continues to trade within a downward-sloping channel on the daily chart. The pair remains below the key 200-day Simple Moving Average (SMA). Therefore, the short-term outlook stays bearish, with rallies likely facing selling pressure.

The Moving Average Convergence Divergence (MACD) indicator has turned slightly positive. However, the Relative Strength Index (RSI) remains near 40, suggesting only limited stabilization rather than a strong recovery.

Any further recovery attempt may face initial resistance near the channel top at $4,082.74. Meanwhile, stronger resistance remains near the 200-day SMA around $4,495.44. On the downside, the $3,661.05 area remains a key support level. A break below this zone would confirm the bearish structure and expose gold to further losses.