Gold Holds Above $4,400 as Fed Outlook Weighs on Dollar

Key Moments

Gold Gains But Momentum Remains Capped

Gold (XAU/USD) continued to attract buyers on Monday, building on Friday’s recovery from the $4,300 zone as a new trading week began. The metal is attempting to maintain traction above the $4,400 level, but it is still trading below last Thursday’s peak, which marked the strongest price since June 5. The advance is constrained by mixed fundamental signals that are keeping bullish conviction in check.

Weak US Data and Softer Inflation Weigh on Fed Hike Expectations

The latest US macroeconomic releases have bolstered support for gold by pressuring the US Dollar. Data published on Friday showed that US Retail Sales declined 0.6% in July, the first decrease in nine months and the sharpest monthly drop since May last year. At the same time, the University of Michigan’s Consumer Sentiment Index fell to 51 in August from 55.2 a month earlier.

These figures add to evidence of moderating US inflation and further reduce expectations of an imminent interest rate increase by the Federal Reserve. This shift has been undermining the USD and enhancing the appeal of non-yielding assets such as gold.

Strategists at BNY note that “softer U.S. data over the last few weeks have reduced rate hike expectations for the rest of 2026,” with markets increasingly questioning the need for additional tightening late in the cycle. They add that “further progress on inflation over the next few months could seal the view that there won’t be a tightening of policy,” suggesting that incoming price data will be pivotal in cementing the market’s dovish shift.

Geopolitical Risks and Energy Prices Support the Dollar

Despite the softer rate outlook, market participants remain concerned that fluctuations in energy prices could complicate the inflation backdrop and prompt the Fed to maintain a hawkish bias. Persistent geopolitical tensions are also lending safe-haven support to the USD, which in turn is constraining further gains in gold.

Treasury Secretary Scott Bessent said that the US is preparing to hit Iran with economic measures that have never been seen, as soon as this week. This statement, together with the broader US-Iran standoff, is keeping geopolitical risk elevated and offering additional backing to the Dollar.

In other developments, President Donald Trump said that he would soon declare the Strait of Hormuz a “territory of the United States.” Meanwhile, Iran’s Foreign Minister Abbas Araghchi said that the US must agree to Tehran’s conditions in order for shipping to resume through the waterway and that there were no negotiations currently taking place. Alongside this, new Ukrainian strikes on Russian refineries are helping to support oil prices, reinforcing inflation concerns and sustaining expectations for at least one Fed rate increase in 2026.

Market Pricing and Upcoming Fed Signals

According to CME Group’s FedWatch Tool, traders are still assigning roughly a 65% probability that the Federal Reserve will raise interest rates by the end of this year. This positioning argues for caution among USD bears and suggests that investors may be reluctant to aggressively add to long gold positions until there is greater clarity on the policy outlook.

As a result, market attention is set to focus on the release of the FOMC Minutes on Wednesday, which could offer fresh insight into the Fed’s thinking about future moves. In parallel, evolving geopolitical headlines are expected to remain key drivers for both the Dollar and gold prices.

Technical Picture: Key Levels for XAU/USD

From a technical standpoint, gold’s repeated inability to secure acceptance above $4,400 – which coincides with the 50% Fibonacci retracement of the April-June decline – signals a potential hurdle for bullish traders. The metal is also trading beneath the 200-day Simple Moving Average (SMA), a factor that keeps the broader trend restrained despite the recent recovery phase.

Momentum indicators, however, are showing improvement. The Relative Strength Index (RSI) stands at 64.43, pointing toward a tilt in favor of buyers, while the Moving Average Convergence Divergence (MACD) remains in positive territory. These readings suggest that bulls are attempting a rebound within what still appears to be a bearish, resistance-heavy environment.

A sustained break and consolidation above $4,400 would open the way for a move toward the 200-day SMA near $4,506 and the 61.8% retracement at $4,509. Beyond these levels, resistance is located at the 78.6% retracement at $4,666, followed by the cycle high region around $4,865.

On the downside, the first notable support is seen at the 38.2% retracement at $4,290, ahead of the 23.6% retracement at $4,154. A more pronounced decline would bring focus to the structural base near the Fibonacci anchor around $3,935.