Gold stalls intraday recovery near of $4,050 as traders keenly await FOMC decision

Gold remains on the defensive as traders move to the sidelines ahead of the FOMC decision.
A modest USD downtick supports the commodity, though the upside potential seems limited.
Recovering oil prices revive inflation fears, boost Fed hike bets, and cap the precious metal.

Haresh Menghani FXStreet

Gold (XAU/USD) struggles to capitalize on its intraday recovery from an over one-week low and trades below the $4,050 level through the first half of the European session on Wednesday.

The US Dollar (USD) remains depressed for the second straight day and trades below the monthly high, set on Tuesday, as bulls opt to wait for the outcome of a two-day FOMC meeting. This, in turn, is seen as a key factor supporting the commodity. However, a fresh escalation of tensions between the US and Iran helps limit deeper USD losses and caps the commodity heading into the key central bank event risk.

In the latest developments surrounding the Middle East crisis, Iran's Islamic Revolutionary Guard Corps (IRGC) launched a surprise attack and targeted US forces in the Middle East with multiple ballistic missiles late Tuesday. All Iranian missiles were successfully intercepted, the US Central Command (Centcom) said in a post on X, and added that US forces remain vigilant and at a high state of readiness. In a subsequent statement, Centcom said that the US and Saudi forces struck multiple terrorist logistics and weapons sites in eastern Iraq, retaliating against more than 30 drone attacks in the past three days by Iran-aligned terrorists.

Meanwhile, President Donald Trump once again warned that the US will return to strong military action against Iran and target key Iranian infrastructure if diplomatic efforts do not bring a rapid resolution to the crisis. This keeps geopolitical risk premium in play and should support the safe-haven USD. Adding to this, concerns about significant disruptions to global energy supplies trigger a sharp recovery in crude oil prices, reviving inflation fears and bolstering bets for at least one interest rate hike by the US central bank. Yemen’s Iran-aligned Houthis fired missiles at a Saudi oil tanker for violating the maritime navigation ban imposed on Saudi vessels.

This comes on top of the US-Iran standoff over the Strait of Hormuz and helps crude oil prices to stage a goodish recovery from an over two-week low, touched on Tuesday. The fundamental backdrop validates the near-term positive outlook for the USD, warranting some caution before positioning for any meaningful appreciation in the Gold price.

XAU/USD daily chart

Technical analysis: Gold bulls seem hesitant as setup backs case for further losses

The recent range-bound price action since June 19 might be categorized as a bearish consolidation phase against the backdrop of a breakdown below a technically significant 200-day Simple Moving Average (SMA). Moreover, the wide gap between spot and this longer-term SMA suggests the broader trend remains under pressure despite some recent stabilization.

Meanwhile, the Relative Strength Index (RSI) hovers around 43 and keeps momentum in mildly negative territory. That said, the Moving Average Convergence Divergence (MACD) edges higher and hints at a tentative recovery attempt within a still-depressed structure. Hence, any attempted recovery might continue to face an immediate hurdle near the $4,050 level.

Further up, the top boundary of the trading range near $4,200 should act as a key barrier to beat. A daily close above this would be needed to ease the broader bearish bias and open the door to a more sustainable advance to the 200-day SMA at $4,493.65.

On the downside, the $4,000 mark, followed by the $3,965 region, or the lower end of the trading range, could offer some support to the commodity. Nevertheless, the XAU/USD pair remains vulnerable to further slippage unless buyers can build a base above the said support levels.

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

Economic Indicator

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