The price of gold (XAU/USD) retains a slight positive bias within the intraday timeframe, trading solidly above $3,300 on Wednesday, as bullish momentum remains weak. Inclement signals from domestic/international geopolitical difficulties, and changing expectations regarding US monetary policy impose further caution on traders ahead of important economic data.
Fed Comments Weigh on USD, Support Gold Prices
The US Dollar Index (DXY) trades near a one-week low after Federal Reserve Chair Jerome Powell’s cautious remarks on Tuesday. Powell stated that inflation could rise due to tariffs and said the Fed is in no rush to cut interest rates, though acknowledged rate cuts could happen sooner if inflation and hiring weaken.
Markets have largely priced in at least 50 bps of rate cuts by year-end, with a 20% probability of a cut in July. These expectations are capping USD gains and providing support for non-yielding assets like gold.
Geopolitical Premium Lingers Despite Ceasefire
Despite a ceasefire officially in place between Iran and Israel, there will always be skepticism over the endurance of such an agreement. Both countries fired missiles at each other prior to reaching a cessation of hostilities agreement, and US President Donald Trump subsequently issued a statement critiquing both sides for their violations of the ceasefire agreement.
Further, media reports suggest that Trump’s recent decision for US airstrikes on Iran(s nuclear facilities may have only ‘delayed’ Tehran’s nuclear capabilities rather than destroyed them. This ongoing uncertainty leaves a geopolitical risk premium that supports safe-haven demand for gold.
XAU/USD Technical Outlook
Gold has now dropped below a short-term upward channel, a possible reversal in sentiment as the 14-day RSI and 4-hour oscillators show increasing downside momentum. Short-term resistance is now at the former channel support around $3,368 – $3,370.
If bulls cannot reclaim this space, the focus shifts to three key support levels of $3,300 visible psychological/technical barrier, $3,245 as the next level and a more general support zone between $3,200-3,175; a decisive break under $3,300 could dictate even deeper correction towards $3,200.4
Conclusion
The gold market is limping between two opposing forces. Risk-on from ceasefire optimism and risk-off hedging that it collapses. This, alongside disparate views from Fed officials on whether and when to cut rates, has left a mess of short-term consolidation. I anticipate traders will sit this week out, waiting for Friday’s Core PCE to provide some clarity.
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