Gold caught between safe-haven demand and Fed expectations

Gold’s recent rally has been fueled by a double-barreled catalyst:

• A soft U.S. CPI print that revived expectations of a Fed rate cut later this year
• An escalating geopolitical crisis after Israel launched a direct strike on Iranian nuclear facilities, which triggered retaliatory threats from Tehran.

Both events caused an immediate surge in risk-off sentiment, boosting demand for gold and propelling XAU/USD above $3,440, approaching its April record highs and now eyeing the target at the $3,500 level.

Markets are now bracing for this week’s catalyst where the Fed will update its dot plot and interest rate guidance. The market is pricing in no change for June, but a more dovish tone could further energize gold bulls. On the flip side, a hawkish hold could trigger profit-taking and a short-term reversal.

Technical overview: Bullish scenario materializing

Previously, I have outlined in my latest update on Gold, Gold breakout scenarios: Safe-haven demand surges after Israel-Iran escalation plus soft-CPI fuel, scenarios that could play out this new week, if not last week Friday.

Bullish case

Bearish case

As risk-off sentiment continue to weigh down on risk assets and giving space for safe-haven assets like gold, the bullish scenario is currently playing out with potentially reaching a new high if the $3,440 level holds.

Bullish case: Break and retest for $3,500+

Gold resumes its trend after a brief pullback into the 4-hour FVG level resting at $3,390-$3,420 level. A clean reclaim of structure would confirm the continuation rally. Institutions may use any dips around $3,420-$3,400 to load positions ahead of Fed guidance.

• Price respects the most recent bullish FVG on 4-hour timeframe.
• Close above $3,400 level or the current resistance of the range.
• Fed signals a dovish pause or hints at cuts by September.

Targets:

• Minor resistance at $3,450-$3,470.
• Breakout extension to $3,500-$3,525.
• Final target: $3,550-$3,600, near ATH levels.

Bearish case: Break in structure back to $3,349 or lower

Price fails to hold the upper FVG and slides back into a retracement targeting deeper liquidity levels. A clean break of $3,349 would confirm the bearish shift. This is more likely if the Fed leans hawkish or geopolitical fears ease.

• Invalidation of the 4-hour FVG.
• Close below $3,375 level, below the Israel-Iran catalyst candle.
• Fed takes a hawkish tone, downplaying rate cuts or upgrading inflation forecasts.

Targets:

• Previous range breakout at $3,350.
• Breakdown opens space toward $3,300-$3,280, below the CPI candle.
• Deeper liquidity sits below $3,200, especially if geopolitical fears fade.