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Gold remains under pressure near $4,000 as Fed decision looms

  • Gold falls around 0.6% and trades near $4,003 as investors avoid large positions before the Federal Reserve decision.
  • Higher US Treasury yields and a resilient US Dollar limit demand for the non-yielding precious metal.
  • Renewed US-Iran hostilities lift Oil prices and inflation concerns, reinforcing expectations of elevated interest rates.

Gold (XAU/USD) trades lower near the $4,003 area on Wednesday, extending its recent decline as investors remain cautious ahead of the Federal Reserve’s (Fed) monetary policy announcement.

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The precious metal struggles to benefit from geopolitical uncertainty as elevated US Treasury yields and a firm US Dollar reduce its appeal. Higher bond yields increase the opportunity cost of holding Gold, which does not provide interest, while a stronger Greenback makes the metal more expensive for buyers using other currencies.

The Fed is generally expected to leave the fed funds rate unchanged within the 3.50%–3.75% range. However, uncertainty surrounding the decision remains elevated, with around 64% of traders expecting a hold and markets pricing an approximately 80% probability of a 25-basis-point increase in September. Investors will closely monitor Fed Chair Kevin Warsh’s press conference for signals about the timing of additional monetary tightening.

Renewed hostilities between the United States (US) and Iran are also influencing Gold. Iranian missiles targeting US forces were intercepted, while US and Saudi forces carried out retaliatory strikes against logistics and weapons sites in Iraq. The escalation pushed Crude Oil prices sharply higher and revived concerns that rising energy costs could keep inflation elevated.

Although geopolitical uncertainty usually supports safe-haven demand for Gold, the inflationary impact of the conflict is currently outweighing that effect. Higher Oil prices strengthen the case for the Fed to maintain restrictive interest rates for longer, limiting the upside potential of the non-yielding metal.

Chart Analysis XAU/USD

Short-term technical analysis:

On the 4-hour chart, XAU/USD trades at $4,011.96, keeping a bearish near-term tone as it holds below both the 20-period Simple Moving Average (SMA) at roughly $4,056 and the 100-period SMA near $4,061. The pair is trading under a dense band of nearby resistance levels, while the Relative Strength Index (RSI) around 39 points to weak momentum and suggests sellers remain in control on intraday rallies.

On the topside, initial resistance is seen at $4,025, followed by $4,033 and then $4,048, before the 20-period SMA at about $4,056 and the 100-period SMA close to $4,061 form a broader capping zone. On the downside, immediate support emerges at the day’s open around $4,024, with a more important floor aligning near $3,996, where buyers would need to defend to prevent a deeper corrective slide.

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

Author

Agustin Wazne

Agustin Wazne joined FXStreet as a Junior News Editor, focusing on Commodities and covering Majors.

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