Gold (XAU/USD) trims a part of its strong intraday gains to levels beyond the $4,200 mark, though it retains positive bias for the first time in four days. Crude Oil prices turn lower following a modest bullish weekly gap after mediators Qatar and Pakistan announced a formal 60-day roadmap aimed at securing a final US-Iran peace deal. This, in turn, helps ease concerns around inflation and higher interest rates, offering some support to the precious metal. The commodity, however, remains well within striking distance of a more than one-week low set on Friday.
That said, traders are still pricing in a nearly 90% chance that the US Federal Reserve (Fed) will raise borrowing costs by the end of this year. The bets were lifted by the Fed’s hawkish forecast last week, signaling that it will need to raise the policy rate this year if inflation remains sticky. Furthermore, the new Fed Chair, Kevin Warsh, focused on price stability during the post-meeting press conference, suggesting that the central bank might not rush to cut rates even in the face of declining growth. Apart from this, geopolitical developments over the weekend act as a tailwind for the US Dollar (USD), which should cap further gains for the Gold.
Iran accused the US and Israel of violating the ceasefire and announced that it had again closed the Strait of Hormuz, citing the continued Israeli strikes in Lebanon. Moreover, US President Donald Trump threatened fresh military action against Iran if Hezbollah continued attacks on Israel. This underscores the fragility of the diplomatic process and keeps the geopolitical risk premium in play. Adding to this, Russia has intensified attacks on major Ukrainian cities in recent weeks, which helps the safe-haven Greenback to stall Friday’s pullback from its highest level since May 2025 and keeps a lid on the Gold, warranting caution for bulls.
Moving ahead, all eyes remain on US-Iran headlines, which might continue to infuse volatility across global financial markets. Apart from this, comments from influential FOMC members will drive the USD demand and provide some impetus to the precious metal. Nevertheless, the aforementioned fundamental backdrop suggests that an attempted recovery might still be seen as a selling opportunity and fizzle out rather quickly.
XAU/USD daily chart
Gold bears have the upper hand while below the 200-day EMA support-turned resistance
From a technical perspective, last week’s failed attempts to clear the 200-day Exponential Moving Average (EMA) support-turned-resistance, and the subsequent fall, favor the XAU/USD bears. Moreover, the Relative Strength Index (RSI) hovers in the upper-30s, hinting at subdued buying interest. Adding to this, the Moving Average Convergence Divergence (MACD) remains in negative territory with a modestly negative histogram, suggesting that downside momentum is easing but not yet reversed.
Meanwhile, the 200-day EMA near $4,334 should act as the first key level that bulls need to reclaim to alleviate the current bearish pressure. Until that level is recovered on a daily closing basis, rebounds are likely to be viewed as corrective within a broader consolidative decline, with momentum signals implying that further tests of lower levels cannot be ruled out.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
SOURCE LINK : Gold trims gains as Fed hike bets and Iran tensions support USD
