Gold Price Forecast: XAU/USD extends pullback from $4,200 as eyes turn to Fed Minutes
- Gold is down for the second straight day early Tuesday, looking to challenge $4,100.
- The US Dollar finds a floor amid renewed risk aversion on Hormuz tensions and an Asian stock sell-off.
- Gold sellers test the 21-day SMA near $4,150 as the daily RSI remains bearish.
Gold is retreating from two-week highs just above $4,200 for the second straight day early Tuesday, as sellers look to attack the $4,100 level.
Gold down on Hormuz risks, ahead of Fed Minutes
Risk-off trades are back in vogue, courtesy of the latest reported attacks on commercial ships in the Strait of Hormuz and a chip sell-off in the Asian markets, providing a floor to the safe-haven US Dollar (USD) at the expense of the USD-denominated Gold.
An Axios reporter, citing a US official, stated late Monday that Iran fired at least two missiles at commercial ships transiting through the Strait of Hormuz. The UK Maritime Trade Operations (UKMTO) also reported a tanker reportedly hit by an unknown projectile on the port side in the Strait.
These alleged Iranian attacks in the Hormuz waters could reignite tensions between the United States (US) and Iran, putting the fragile ceasefire at risk and market sentiment on edge.
Asian equities remain under heavy bearish pressure as technology shares are being sold off, following Samsung’s slide after its earnings report. The tech-heavy Nasdaq futures decline suggests that Monday’s rebound on Wall Street could be temporary.
Attention now turns to the Minutes of the US Federal Reserve (Fed) June monetary policy meeting, due on Wednesday, with markets scaling down expectations of a near-term interest rate hike in the face of weak US ISM Services PMI and Nonfarm Payrolls data.
The Institute for Supply Management (ISM) said on Monday its Services Purchasing Managers Index edged down to 54.0 last month from 54.5 in May. Last Thursday, the US NFP increased by 57,000 in June, well below expectations for a 110,000 rise. The Labor Force Participation Rate dropped to 61.5%, a five-year low.
Markets now project a 57% chance of a September Fed rate hike, down from roughly 70% before these data, according to the CME Group’s FedWatch tool.
Therefore, the Fed Minutes will be closely scrutinized for fresh direction on new Chair Kevin Warsh's monetary policy path and Gold price.
In the meantime, Gold traders will focus on the geopolitical developments around the Strait of Hormuz and the daily technical setup.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,130.36, maintaining a bearish near-term bias as spot holds below all the major simple moving averages. The 21-day simple moving average (SMA) at $4,147.33 is the first cap just above the market, while the 50-day SMA at $4,382.65 and the 200-day SMA at $4,489.96 reinforce a dense overhead supply zone, with the longer-term 100-day SMA up at $4,619.04 underscoring the broader downside tilt. The Relative Strength Index (14) around 44 stays below its midline, hinting at subdued bullish momentum and favoring further consolidation under these barriers.
Further, the Death Cross remains in play after the 50-day SMA closed below the 200-day SMA on a weekly closing basis, keeping sellers hopeful.
On the topside, immediate resistance is seen at the 21-day SMA near $4,147, followed by the 50-day SMA around $4,383 and the 200-day SMA close to $4,490, where sellers could reassert control on corrective bounces. A sustained recovery through the $4,490 area would be needed to challenge the 100-day SMA near $4,619 and start easing the prevailing bearish pressure, while on the downside, the lack of nearby moving-average support leaves XAU/USD vulnerable to fresh lows below the current price, with traders likely looking to prior swing troughs for the next structural floors.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
(The story was corrected on July 7 at 05.33 GMT to say that "Gold is down for the second straight day early Tuesday," not Monday.)
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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.
