Gold rises amid heightened external risks

Gold traded around 4,080 USD per ounce on Wednesday, having risen nearly 2% the previous day. Investors continue to assess developments in the Middle East and the impact of elevated oil prices on inflation and interest rates.

Donald Trump has played down the prospects of an imminent resumption of negotiations with Iran and warned of further strikes, which continues to support oil prices. Additional supply risks are emerging from disruptions to shipping across the Red Sea due to actions by the Yemeni Houthis, as well as a series of attacks on the Caspian Pipeline Consortium terminal on Russia's Black Sea coast.

ADP data showed a further slowdown in the US labour market. In the four weeks to 4 July, the private sector created an average of 16,500 jobs per week, down from 19,250 in the previous four-week period. The pace of hiring has now declined for four consecutive periods.

Markets have little doubt that the Federal Reserve will keep rates unchanged at next week's meeting. At the same time, the probability of a rate hike in September now exceeds 55%, which limits gold's upside potential.

Technical analysis

On the H4 XAU/USD chart, the market is trading within a consolidation range around the 4,044 USD level. After an upside breakout, the market moved higher to 4,140 USD. A decline to 4,044 USD followed, with a subsequent rebound to 4,088 USD. A further move lower towards 3,940 USD is expected. The MACD indicator signals the early stages of bearish momentum, with its signal line above the centre line and beginning to turn downwards.

On the H1 chart, the market has broken below the 4,122 USD level and is moving lower towards 4,044 USD, followed by a potential rise to 4,088 USD. A wide consolidation range is forming around 4,088 USD. The Stochastic oscillator confirms this scenario, with its signal line below 80 and pointing downwards towards 20, indicating increasing short-term downside pressure.

Conclusion

Gold has rallied in response to rising external risks, including escalating tensions in the Middle East, fresh warnings from President Trump on Iran, and supply disruptions in the Red Sea and Black Sea. These factors have pushed oil prices higher, reinforcing concerns about inflation. However, the metal's gains have been tempered by a cooling US labour market, as ADP data showed a fourth consecutive slowdown in hiring. Markets expect the Fed to hold rates next week, although the probability of a September hike exceeds 55%, limiting gold's upside potential. Technically, gold may see a pullback towards 4,044 USD before any further upside, with the broader trend depending on geopolitical developments and US monetary policy expectations.