Gold Price Forecast: Bears retain control as Fed rate hike bets continue to boost USD

Gold (XAU/USD) recovers slightly from a nearly two-week low, around the $4,050 region, touched earlier this Wednesday. The commodity, however, sticks to its bearish bias for the second straight day – also marking the fifth day of negative move in the previous six – and seems vulnerable to weaken further amid sustained US Dollar (USD) buying.

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, shot to a fresh high since May 2025 on the back of Federal Reserve (Fed) rate-hike expectations and the global flight to safety. The US central bank struck a hawkish tone at last week’s ​meeting, with nine of the Fed's 19 committee members suggesting that they will need to raise the policy rate to combat sticky inflation. Traders were quick to react and are now assigning a 70% probability that the US central bank will raise borrowing costs by 25 basis points (bps) at the September meeting. Furthermore, forecasts point to a potential second interest rate hike in December.

Adding to this, a tech-driven selloff triggers the risk aversion, which, along with mixed US-Iran messages, overshadows easing inflationary concerns, led by the recent fall in Crude Oil prices, and continues to benefit the safe-haven USD. US Vice President JD Vance said on Monday that peace talks in Switzerland had resulted in Iran agreeing to invite inspectors from the International Atomic Energy Agency (IAEA) to its nuclear facilities. However, Iran's state media, citing the foreign ministry, reported that Tehran had made no new commitments on nuclear inspections. This keeps geopolitical risk premiums in play and favors the USD bulls.

Meanwhile, Crude Oil prices have fallen significantly over the past month or so, hitting a fresh low since March on Wednesday amid the resumption of traffic through the Strait of Hormuz. An Iranian military source told Fars news agency that a limited number of vessels are being allowed to pass through the strait each day under coordination with Iran’s Revolutionary Guards Navy. Furthermore, a temporary 60-day sanctions waiver that authorizes the production, delivery, and sale of Iranian crude oil, petroleum, and petrochemical products eases supply concerns and weighs on Oil prices. This should alleviate upstream pressure on consumer inflation.

The developments, however, do little to dent the underlying bullish sentiment surrounding the USD, suggesting that the path of least resistance for Gold remains to the downside. The market focus now shifts to the release of the US Personal Consumption Expenditures (PCE) Price Index, due on Thursday. The key data will be accompanied by the final US Q1 GDP print, the usual Weekly Initial Jobless Claims, and Durable Goods Orders. This, along with comments from influential FOMC members, will play a key role in driving the USD demand and providing some meaningful impetus to the precious metal during the latter part of the week.

XAU/USD 4-hour chart

Technical Analysis:

The recent repeated failures near the 100-period Simple Moving Average (SMA) on the 4-hour chart, and the subsequent decline, favor bearish traders. Meanwhile, the Relative Strength Index (RSI) at 34.9 hovers just above oversold territory, suggesting downside momentum is dominant but stretched. However, the Moving Average Convergence Divergence (MACD) indicator stays in negative territory with a reading near -6.1, reinforcing a weak tone. Nevertheless, the bearish configuration hints that rallies are likely to be sold into for now.

Initial resistance is seen at the 100-period SMA around $4,283. Bulls would need to reclaim to ease the current downside pressure and open the way for a more sustained recovery. Until that barrier is overcome, the metal is likely to remain vulnerable to further declines, with traders watching for any stabilization in RSI or a contracting negative MACD histogram as early signals that the selling phase could be losing strength.

(The technical analysis of this story was written with the help of an AI tool.)