Gold (XAU\/USD) rose modestly from its lowest level since 30 March, near $4,480, but struggled to extend gains. Continued US dollar strength, tied to geopolitical uncertainty and higher oil prices, kept pressure on non-yielding gold.<\/p>\n
A drone strike caused a fire at the Barakah Nuclear Power Plant in the UAE. Saudi Arabia said it intercepted three drones launched from Iraq, while the US warned Iran to move quickly towards a deal.<\/p>\n
Tensions also affected energy markets, with crude oil at a two-week high after a US blockade of Iranian ports and disruption around the Strait of Hormuz. Higher oil prices fed inflation concerns and supported expectations of tighter US monetary policy.<\/p>\n
CME Group\u2019s FedWatch Tool shows traders pricing over a 50% chance of a Fed rate rise by the end of this year, with talk also centred on a possible hike in 2026. Markets are watching the FOMC Minutes on Wednesday and global flash PMIs for further direction.<\/p>\n
In physical markets, discounts in India hit a record last week, while Chinese premiums stayed firm. Technically, gold faces support at the 200-day SMA of $4,352.59 and resistance at the 100-day SMA of $4,790.55, with RSI near 40 and MACD negative.<\/p>\n
The current environment strongly suggests a bearish stance on gold for the coming weeks. Rising tensions in the Middle East are fueling a flight to safety in the US Dollar, which is acting as a headwind for the precious metal. With crude oil prices pushing inflation concerns to the forefront, the market is betting on a more aggressive Federal Reserve.<\/p>\n
The US Dollar Index is now firmly above 107.50, a level we have not seen since the market jitters in late 2025. This strength is compounded by WTI crude futures topping $115 a barrel, directly feeding expectations for a Fed rate hike later this year. In fact, following last week’s hot Core PCE reading of 3.1%, fed funds futures are now pricing in a 65% probability of a rate increase by December.<\/p>\n
From our perspective, any upward movement in gold towards the $4,500 psychological level should be viewed as a selling opportunity. We are looking at the 200-day moving average around $4,352 as the next significant target on the downside. The failure to reclaim the 100-day moving average last week confirms this downward momentum.<\/p>\n
We must keep a close watch on this Wednesday’s FOMC minutes for any language that confirms the Fed’s hawkish outlook. This situation reminds us of the pattern in 2025, where initial safe-haven bids for gold quickly faded as the market priced in higher interest rates. A sustained move back above the 100-day SMA at $4,790 would be the first sign that this bearish thesis is wrong.<\/p>\n
While we note the strong physical demand from Chinese buyers, the record discounts in India suggest broader physical support is weak. These factors are unlikely to provide a floor for prices as long as the dollar remains strong. The combination of high US Treasury yields, now holding above 4.85% on the 10-year note, and geopolitical risk favoring the dollar will likely dominate gold’s direction.<\/p>\n
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