Gold eyes breakout as US-Iran conflict clashes with Fed’s cautious outlook

Gold (XAUUSD) is currently facing mixed signals as geopolitical tensions and Federal Reserve policies influence market sentiment. The recent US airstrikes on Iranian nuclear sites have raised Middle East tensions, typically a bullish factor for gold. However, the Federal Reserve’s cautious policy outlook and a strong US Dollar have limited gains. With traders awaiting key global economic data, gold remains range-bound and struggles to find clear direction.

How geopolitical tensions and Fed outlook are shaping Gold prices

The US airstrikes on Iranian nuclear facilities have escalated tensions in the Middle East. This aggressive move targeted key locations in Fordo, Natanz, and Isfahan, marking a significant increase in hostilities. Iran responded with strong rhetoric, promising to defend itself against further provocation. The market typically views such events as bullish for gold, a traditional haven. However, the impact this time was muted due to competing factors.

The Federal Reserve also played a significant role in weakening gold’s appeal. Despite projecting two rate cuts in 2025, Fed officials signaled only minimal policy easing in 2026 and 2027. This cautious stance, driven by concerns over potential inflation from renewed tariffs, helped the US Dollar remain strong. Since gold is a non-yielding asset, a firm dollar and rising yields tend to pressure its price.

Additionally, traders are awaiting the release of global flash PMIs, which could provide insight into the health of the world economy. Until these indicators become clearer, market participants are likely to remain on the sidelines, keeping gold in a narrow range.

Gold technical outlook: Ascending channel limits momentum

The gold chart below shows the current struggle with upward momentum. Price action shows a well-defined ascending channel stretching from April to June. There are repeated rejections at both the upper and lower bounds of the trend lines. Currently, gold is hovering near the mid-level of this channel, around $3,368, after facing resistance just shy of $3,440.

Repeated attempts to break above $3,440 have failed, creating a horizontal resistance zone. This zone has become a short-term barrier for bulls. Meanwhile, the ascending lower trendline, marked by previous bounces, is acting as dynamic support. If this support holds, gold could once again attempt to challenge the upper channel limit.

However, if gold breaks below the rising trendline, a deeper retracement could follow. The next potential support lies around the $3,285 region, aligning with previous swing lows. A break below this area could trigger further selling pressure, especially if the dollar continues to strengthen.

The upside potential remains intact as long as the ascending structure is preserved. A clear breakout above $3,440 would likely attract fresh buying interest. This could potentially pave the way for $3,700 and higher, as suggested by the projected upper boundary of the Channel.

Conclusion

Gold remains under pressure despite a supportive geopolitical backdrop. The US Dollar’s strength and the Fed's cautious outlook have capped the metal’s gains. Technically, gold trades within an ascending channel, but a clear direction requires either a breakout above $3,440 or a breakdown below key support. Until then, traders may prefer to wait for decisive price action. Upcoming economic data and further developments in the Middle East will be key to determining the next significant move for gold.

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