Gold Price Forecast: XAU/USD defends $4,100, but for how long?
- Gold is back in the red early Tuesday, having faced rejection once again at $4,200.
- The US Dollar holds at yearly highs amid hawkish Fed outlook, scepticism over US-Iran deal progress.
- Gold is primed to attack $4,100 as the daily technical setup remains in favor of sellers.
Gold is resuming its downside momentum toward $4,100 early Tuesday, following a temporary reversal seen a day ago.
Gold: Sell the strength?
Gold sellers continue to lurk at around the $4,200 mark, keeping the bearish bias well in place, despite some progress between the United States (US) and Iran toward a peace deal.
“US Vice President JD Vance said talks with Iranian officials in Switzerland had laid a good foundation for a final peace deal, although Iran denied that it had begun discussions of its nuclear programme,” per Reuters.
Against this backdrop and the continued closure of the Strait of Hormuz, investors remain sceptical about the progress in the peace negotiations, which could turn south any time amid potential verbal threats from US President Donald Trump.
Therefore, investors continue to run for cover in the US Dollar (USD), keeping the buck at its highest level in over a year against its six major currency rivals.
The Greenback also derives its strength from increased bets around a US Federal Reserve (Fed) interest rate hike by the end of this year.
Markets price in an 88% chance of a rate hike in December, up from 61% before the Fed meeting last week, according to the CME FedWatch Tool.
The broad USDF strength and hawkish Fed expectations leave the non-yielding bullion at risk of further downside.
Later in the day, the US S&P Global preliminary Manufacturing and Services PMI data will be published, which could strengthen Fed hike bets, fuelling a fresh leg down in Gold.
The S&P Global Manufacturing PMI is seen falling slightly to 54.7 in June from 55.1 in May, while the Services PMI is expected to tick up to 51 in the same period from 50.7 in May.
Besides, Fedspeak and the US-Iran headlines will continue to play a pivotal role in driving risk sentiment and the Gold price action.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,136.00, extending a bearish phase as spot holds below all key simple moving averages (SMA). The 21-day SMA at $4,328.42 leads initial overhead pressure, with the medium-term 200-day and 50-day SMAs clustered higher at $4,471.81 and $4,515.31, respectively, reinforcing a capped tone. The Relative Strength Index (14) at 35.76 hovers just above oversold territory, hinting that while downside momentum persists, the sell-off is losing some intensity rather than accelerating.
On the topside, immediate resistance is seen at the 21-day SMA near $4,328, where a daily close above would be needed to ease immediate pressure and open the way toward the 200-day SMA at roughly $4,472. A more meaningful bullish reprieve would require reclaiming the 50-day SMA at around $4,515, with the 100-day SMA much higher at about $4,709 acting as a broader trend barrier. With no clear SMA-based support levels below spot from the provided data, the metal remains vulnerable to further declines while it trades beneath this layered resistance zone.
(The technical analysis of this story was written with the help of an AI tool.)
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.
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.
