Gold Steady Near Peak on Fed and Mideast Focus

Key Moments

Gold Supported by Softer Dollar and Diplomacy Hopes

Gold (XAU/USD) extends its recent advance heading into the European session, holding a firm bid just below the two-week high reached earlier on Wednesday. The move coincides with a retreat in the US Dollar after a four-session winning streak, as market participants respond to signs that diplomatic channels between the United States and Iran remain open. Expectations that progress on this front could ease energy prices and cool hawkish US Federal Reserve (Fed) views are helping to support the precious metal.

Negotiators from both sides have indicated they have not abandoned discussions. US Secretary of State Marco Rubio said on Sunday that the US was still willing to engage in talks with Iran, while Iran’s Interior Minister Eskandar Momeni called on Pakistan to maintain its mediation efforts. Additional reports point to ongoing work by intermediaries to bring Washington and Tehran back into formal negotiations.

Regional Escalation Fuels Oil and Inflation Concerns

Despite these diplomatic signals, military activity in the region has intensified. The US military reported that it had completed an 11th consecutive night of strikes on Iran early Wednesday, focusing on aircraft hangars and drone storage facilities. President Donald Trump stated that US operations would escalate and target any location where Iran attempts to rebuild its nuclear capabilities.

Iran has continued its own actions across the Gulf, directing attacks toward US military assets in Bahrain, Kuwait and Jordan. Iranian forces also reported striking two oil tankers as they moved through the Strait of Hormuz. In parallel, Yemen’s Iran-aligned Houthi group announced it was opening a new front in the conflict and declared a naval blockade against Saudi Arabia.

These developments heighten the risk of a broader regional confrontation and add to concerns about a tightening global energy supply backdrop, particularly given the closure of the Strait of Hormuz. Crude oil prices have risen to their highest level since June 12, reinforcing worries over energy-driven inflation. This has strengthened the view that the Fed may need to maintain a restrictive stance for longer.

According to the CME Group’s FedWatch Tool, market pricing currently reflects roughly an 88% probability that the Fed will raise interest rates at least once by the end of this year. This outlook underpins demand for the US Dollar and argues for caution before expecting a sustained upside extension in non-yielding assets such as gold.

Analysts See Two-Sided Trade as Fed, Yields and Oil Dominate

Analysts at OCBC note that, under current conditions, gold is likely to experience “two-way” trading in the near term, with recoveries facing clear resistance. They highlight that “a more sustained recovery likely requires oil prices to back off, some easing in real yields and Fed tightening expectations,” and warn that “until then, upside may remain capped.”

Technical Picture: Gold Pressures Resistance Above 200-SMA

From a chart perspective, XAU/USD has pushed through the 38.2% Fibonacci retracement of the decline from mid-June and is holding above the $4,100 level, reinforcing the bullish tone. Momentum studies support this constructive bias: the 14-period Relative Strength Index (RSI) is hovering near overbought conditions at around 69.9, while the Moving Average Convergence Divergence (MACD) remains positive with its line comfortably above zero. These signals suggest that upside pressure persists, even if conditions appear stretched in the short term.

However, technicians point out that a decisive move beyond the 200-period Simple Moving Average (SMA) on the 4-hour chart is still required to confirm a more durable bullish structure. If that occurs, gold could be positioned to challenge a series of Fibonacci retracement levels and previous cycle highs.

Key XAU/USD Technical Levels

On the upside, a firm break above the 200-period SMA on the 4-hour timeframe would underpin the constructive view and open the way for a test of initial resistance at the 50.0% retracement at $4,163.16. Further strength could then target the 61.8% Fibonacci level at $4,215.39, followed by the 78.6% retracement at $4,289.75, ahead of the cycle peak at $4,384.47.

On the downside, the 200-period SMA near $4,128.26 marks the first area of support, with subsequent layers at the 38.2% retracement at $4,110.93 and the 23.6% Fibonacci level at $4,046.31. A more pronounced pullback would bring focus to the structural low around $3,941.85.