Gold Forecast: XAU/USD’s path of least resistance remains to downside ahead of Warsh
- Gold comes under renewed selling pressure early Wednesday and gives up $4,000 yet again.
- The US Dollar stands tall on surging USD/JPY, Mideast woes and hawkish Fed bets.
- Gold remains poised to crack November 2025 lows near $3,930 amid bearish technicals.
Gold faltered in its brief recovery stint above the $4,000 mark in early Wednesday’s trading, reverting toward seven-month lows of $3,942 reached a day ago.
Gold: At the mercy of USD, US Treasury yields and Warsh
Despite the previous attempts to regain $4,000, Gold sellers refuse to give up amid relentless US Dollar (USD) buying across the board, making the bullion more costly to hold for foreign investors.
The Greenback continues to capitalize on the ongoing US-Iran tensions, hawkish expectations around the US Federal Reserve’s (Fed) interest rate hike prospects and the USD/JPY pair's upsurge to four-decade highs.
After the United States (US) and Iran traded strikes over the weekend over control of the Strait of Hormuz, markets remain wary amid a lack of certainty over the likely peace talks between both sides and also on the durability of the fragile ceasefire.
The latest report by the Wall Street Journal (WSJ) stated on Wednesday that US President Donald Trump has recently consulted with Defense Secretary Pete Hegseth and Joint Chiefs Chairman Gen. Dan Caine on the prospect of renewed war with Iran but has, for now, decided to prioritize diplomatic engagement.
Meanwhile, Tuesday’s strong US JOLTS Job Openings report bolstered Fed rate hike bets and US Treasury bond yields, driving the next leg up in the buck.
The CME Group’s FedWatch Tool shows markets are now pricing in roughly a 67% chance of a September rate hike, underscoring growing confidence that the Fed isn't done tightening.
Surging US Treasury bond yields widen the interest rate differential between the US and Japan, exacerbating pain for the Japanese Yen (JPY) and keeping USD/JPY at its highest level in four decades near 162.80 as of writing.
That being said, all eyes now turn to the European Central Bank's (ECB) annual forum in Sintra, Portugal, later in the day, where new Fed Chairman, Kevin Warsh, participates in a key policy panel. His comments will be closely scrutinized to reaffirm the recent repricing by the Fed, following a surprisingly hawkish Warsh’s debut as the Fed Chair last month.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $3,978.72, extending its decline below all major moving averages and maintaining a bearish near-term bias. The 21-day simple moving average (SMA) at roughly $4,191 now acts as the nearest dynamic cap, with the 50-day SMA around $4,423 and the 200-day SMA near $4,482 reinforcing a broader overhead supply zone, while the 100-day SMA further up at about $4,653 underscores the depth of the medium-term downtrend. The Relative Strength Index (14) hovers near 33, hinting at persistent but not yet extreme oversold conditions that could slow, but not yet reverse, the current bearish pressure.
Further backing the downside, the Death Cross remains in play after the 50-day SMA closed below the 200-day SMA on a weekly closing basis last Friday.
On the topside, initial resistance is seen at the 21-day SMA around $4,191, with a break above this level exposing the 50-day SMA near $4,423, ahead of the 200-day SMA at about $4,482 and the more distant 100-day SMA close to $4,653. On the downside, with no nearby structural supports highlighted by the moving averages, traders may look to prior price lows and the oversold RSI backdrop as a guide for potential exhaustion, though the prevailing structure suggests rallies are likely to be sold while price holds beneath this layered resistance stack.
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator
Fed's Chair Warsh speech
Kevin Warsh took office as chairman of the Board of Governors of the Federal Reserve in May 2026, for a four-year term ending in 2030. His term as a member of the Board of Governors will expire in May 2040. Warsh, born in Albany (New York) on April 13, 1970, is an American financier and attorney who already served as a member of the Fed Board of Governors from 2006 to 2011 and was significantly involved in the central bank's response to the financial crisis.
Read more.Next release: Wed Jul 01, 2026 13:00
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Source: Federal Reserve
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.
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Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
