Gold Nears $4,350 as Fed Outlook Counters Geopolitics Now

Key Moments

Gold Finds Support After Brief Pullback

Gold (XAU/USD) starts the week on a slightly weaker footing but quickly erases an early intraday decline, trading near the upper end of its daily range and approaching the $4,350 area ahead of the European session on Monday. Despite the recovery, the metal remains below the peak reached on Friday after the US Nonfarm Payrolls (NFP) release, which marked its highest level since June 17.

The latest NFP report showed that the US economy unexpectedly shed 23K jobs in July. In addition, the prior month’s figure was revised down to 20K from 57K. The softer labor data signaled a cooling employment backdrop and weakened the argument for additional interest rate increases by the US Federal Reserve. That shift in expectations weighed on the US Dollar (USD) and initially helped the non-yielding metal advance.

Middle East Risks and Oil Prices Reinforce USD Support

The initial downward reaction in the USD after the NFP data did not persist. Ongoing uncertainty around the situation in the Middle East and developments surrounding the reopening of the Strait of Hormuz have lent renewed support to the Greenback’s safe-haven appeal.

Iran has reiterated that a full reopening of this critical shipping lane is conditional on several factors, including an end to the US naval blockade, removal of sanctions, and compensation for war-related damage. Tehran has also rejected direct talks with the US, citing alleged violations of the interim peace agreement reached in June. These factors keep geopolitical risk elevated and provide a floor under the USD, limiting gold’s advance.

At the same time, the standoff between the US and Iran is helping to underpin crude oil prices. Market participants remain concerned that higher energy costs could amplify inflation pressures and prompt major central banks to maintain or adopt a more hawkish policy stance. According to the CME Group’s FedWatch Tool, investors continue to assign a higher probability to a US rate increase by year-end. This backdrop supports elevated US Treasury yields, favors USD strength, and argues for the potential for renewed downside in gold, even as traders await fresh direction from upcoming US inflation releases.

Focus Turns to US CPI and Fed Expectations

Commentary from TD Securities highlights that “the risk of a hike lingers,” though the firm suggests that the forthcoming inflation numbers could materially influence market pricing. The team expects “core and headline CPI this week (0.20% m/m and 0.15% m/m, respectively)” and believes that such outcomes “would likely lead to further pricing out of hikes.” With “the majority of the recent move higher in rates driven by Fed expectations,” TD Securities notes that “rates could move lower as hikes are priced out.”

Technical Picture: Key Levels Capping the Advance

From a technical standpoint, XAU/USD remains constrained beneath key longer-term moving averages. The pair trades below the 100-day Simple Moving Average (SMA), located near $4,390, and the 200-day SMA, which sits close to $4,496. Momentum indicators are constructive but not extreme: the Moving Average Convergence Divergence (MACD) remains in positive territory, while the Relative Strength Index (RSI) is in a bullish yet not overbought zone around 64.

Gold has regained the 38.2% Fibonacci retracement of the April-June decline, positioned around $4,303.27. However, a series of higher retracement levels and the major moving averages above the market continue to suggest that rallies remain vulnerable to renewed selling pressure.

On the topside, the first hurdle is the 100-day SMA near $4,390, followed by the 50% retracement at roughly $4,414. A sustained daily close above this area would open the way toward the 200-day SMA around $4,496 and the 61.8% retracement level near $4,525. Beyond that, additional resistance is seen at the 78.6% retracement around $4,683 and at the recent cycle peak close to $4,884.

On the downside, immediate support is aligned with the 38.2% retracement near $4,303, followed by the 23.6% retracement in the $4,166 zone. If selling pressure were to intensify, a deeper retreat toward the anchor area around $3,944.21 cannot be excluded.