Gold Slips as Dollar Rebounds on Fed, Mideast Tensions

Key Moments

Gold (XAU/USD) trades lower in Asia after failing to extend a two-day advance above the $4,100 level.
US data showed slower growth and easing inflation, but volatile crude prices and Fed hike expectations continue to underpin the USD.
Technically, Gold remains in a range but is viewed as vulnerable below its 200-day SMA, with resistance near $4,175-$4,200 and support around $3,976-$4,000.

Dollar Recovery Pressures Gold Prices

Gold (XAU/USD) remains under selling pressure during Friday’s Asian trading, coming off a recent attempt to build on a two-session rally above $4,100. The metal is struggling as the US Dollar recovers from its sharp decline to the lowest level since June 17, reclaiming some of the previous day’s losses.

Renewed demand for the Greenback is emerging even after US economic releases pointed to a cooling backdrop. The dollar’s rebound is weighing on the non-yielding metal, which is already vulnerable amid expectations that US interest rates could still move higher.

US Growth and Inflation Data Ease, But Fed Hike Risk Persists

Economic figures released on Thursday signaled softer momentum in the US economy and moderating price pressures, which initially reduced the likelihood of an imminent Federal Reserve rate increase and triggered the overnight slide in the USD.

The first estimate from the US Bureau of Economic Analysis (BEA) indicated that US GDP grew at an annualized pace of 1.5% in the second quarter, down from 2.1% in the previous period and below consensus projections. On the inflation front, the headline US Personal Consumption Expenditures (PCE) Price Index declined 0.1% in June, its first monthly drop since April 2020, as a temporary pause in the Iran war contributed to lower gasoline prices.

On a yearly basis, headline PCE eased from 4.1% to 3.7%, aligning with expectations. The core PCE measure – the Fed’s preferred gauge of underlying inflation – increased 0.1% on the month versus 0.3% in May, and slipped from 3.4% to 3.3% over 12 months.

Despite these signs of disinflation, lingering volatility in crude oil prices linked to the US-Iran confrontation continues to pose upside risks to inflation. This backdrop is helping sustain expectations that the Fed may still have to tighten policy further.

Middle East Developments Keep Energy and Inflation Risks Elevated

Geopolitical headlines in the Middle East are reinforcing concerns over global energy supply and price stability. The US military stated that it had completed a “heavy wave of strikes against Iran, in response to Iranian missile attacks on its forces in the Middle East.”

At the same time, Iran turned down Oman’s proposal for a 50-50 joint management arrangement that would have given Tehran partial control over the Strait of Hormuz and allowed it to collect voluntary fees from vessels using the route.

In a parallel effort to secure maritime traffic, Saudi Arabia is assembling an international coalition intended to safeguard critical shipping corridors in the Bab al-Mandab Strait, the Red Sea, and the Gulf of Aden from continuous attacks by Yemen’s Houthi groups. These developments heighten the risk of a broader regional escalation, reinforcing a geopolitical risk premium in crude oil and fueling worries that higher energy costs could rekindle inflation pressures.

Such concerns, in turn, support expectations that the Federal Reserve may need to maintain or even increase its restrictive stance, underpinning US yields and the Dollar and diverting flows away from Gold.

Fed Expectations and Upcoming US Data

Positioning in interest-rate futures continues to reflect a strong conviction that the Fed is not done tightening. According to the CME FedWatch Tool, market participants are still assigning more than an 85% probability that the US central bank will raise interest rates at least once before year-end.

This policy outlook is helping keep US Treasury yields elevated, lending additional support to the Greenback and limiting Gold’s appeal. Market participants now await the release of the University of Michigan US Consumer Sentiment and Inflation Expectations Index for fresh direction. For the moment, XAU/USD remains locked in a multi-week range, with traders looking for a decisive catalyst to define the next major move.

Gold Technical Outlook: Range-Bound but Skewed Bearish

The price behavior in Gold over roughly the past month can still be interpreted as a consolidation phase following a breakdown below the 200-day Simple Moving Average (SMA). Within this context, the balance of risk is viewed as tilted to the downside, even though momentum signals are not uniformly bearish.

The Moving Average Convergence Divergence (MACD) histogram has eased from recent peaks but remains in positive territory, while the Relative Strength Index (RSI) is hovering just below the 50 level. This combination is consistent with a modest rebound attempt that is unfolding within a broader downside-biased setup.

Gold (XAU/USD) – Key Technical Levels	Level	Commentary
Immediate resistance	$4,175	Upper boundary of recent trading range; first upside barrier
Next resistance	$4,200	Break above would open room for additional gains
Major resistance	$4,490.81	Approximate location of 200-day SMA; key level to negate bearish tone
Initial support	$3,976–$4,000	Recent swing lows where buying interest has previously emerged

On the upside, the upper end of the consolidation band near $4,175 is the first notable resistance, followed by the $4,200 region. A sustained breakout above these levels would be needed to clear the path toward the 200-day SMA around $4,490.81. Only a move through this longer-term average would significantly soften the prevailing bearish narrative and establish scope for a more durable recovery.

On the downside, nearby support is derived from the cluster of recent lows in the $3,976–$4,000 area, where buyers have previously stepped in. A failure to hold this zone could underline the vulnerability of the metal within its broader range structure.