Gold bounces off late March lows ahead of FOMC Minutes; not out of the woods yet

Gold (XAU/USD) recovers slightly from its lowest level since March 30, touched early this Wednesday, though it remains on the back foot below the $4,500 psychological mark through the first half of the European session. Investors remain skeptical about a potential US-Iran peace deal. This, along with inflation fears and expectations for a more hawkish  US Federal Reserve (Fed), helps the US Dollar (USD) to preserve its recent strong gains near a six-week high and weighs on the commodity.

US President ​Donald Trump said on Tuesday that America may need to strike Iran again if a deal is not reached and that he had been an ​hour away from ordering an attack before postponing it following a request from three Gulf leaders. Meanwhile, Vice ​President JD Vance said the US and Iran have made a lot of progress in their talks, and neither side wants to see a resumption ​of the military campaign. However, doubts over a long-elusive diplomatic agreement to end the Iran conflict remain amid major disagreements over Tehran's nuclear program and the Strait of Hormuz. This continues to underpin the Greenback's reserve currency status, which is seen as a key factor acting as a headwind for the Gold price.

Meanwhile, the uncertainty fueled by the US-Iran stalemate keeps Crude Oil prices elevated near the monthly peak, fueling inflationary concerns and lifting Fed rate hike bets. According to the CME Group's FedWatch Tool, traders are now pricing in over a 55% chance that the US central bank will raise borrowing costs by at least 25 basis points (bps) in 2026. The outlook was reaffirmed by comments from Philadelphia Fed President Anna Paulson, who said that an appropriate rate increase is possible if growth exceeds potential or inflation threats arise. This led to the recent sharp increase in US Treasury bond yields, which further lends support to the buck and exerts some pressure on the non-yielding Gold price.

The USD bulls, however, seem hesitant and keenly await the release of FOMC Minutes, due later in the North American session, for more cues about the Fed's policy path. This, along with further developments surrounding the Middle East crisis, could provide some impetus to the precious metal. Nevertheless, the aforementioned fundamental backdrop seems tilted in favor of the USD bulls and suggests that the path of least resistance for the Gold price is to the downside. Hence, any recovery attempt is more likely to get sold into and runs the risk of fizzling out rather quickly.

XAU/USD daily chart

Gold bears have the upper hand as breakdown below $4,500 support remains in play

From a technical perspective, acceptance below the $4,500 psychological mark could be seen as a fresh trigger for bearish traders and backs the case for further losses. Moreover, momentum indicators are soft, with the Relative Strength Index (RSI) hovering in the mid-30s and the Moving Average Convergence Divergence (MACD) in negative territory.

This hints that upside traction is fading even as price remains underpinned by long-term trend support near the 200-day Simple Moving Average (SMA) at roughly $4,363.73. A decisive break below this moving average would expose a deeper correction, while holding above it would allow XAU/USD to consolidate its broader uptrend despite the presently weak momentum backdrop.

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