Gold advances to $4,200 neighborhood as reduced Fed hike bets keep USD depressed
- Gold attracts buyers for the third consecutive day as receding Fed hike bets undermine the USD.
- Geopolitical uncertainties could limit deeper USD losses and cap the upside for the commodity.
- The XAU/USD pair still remains on track to register modest gains for the first time in five weeks.
Gold (XAU/USD) is seen building on this week's recovery move from its lowest level since November 2025 and gaining positive traction for the third straight day on Friday. The precious metal advances to the $4,200 neighborhood, or a one-and-a-half-week high, during the Asian session and remains on track to register gains for the first time in five weeks.
Traders trimmed their bets for interest rate hikes by the US Federal Reserve (Fed) following the release of softer-than-expected US monthly employment details on Thursday, which, in turn, is seen underpinning the non-yielding Gold. The closely-watched US Nonfarm Payrolls (NFP) report showed that the economy added only 57K new jobs in June, compared to the 110K consensus estimates. Moreover, the previous month's reading was revised down from 172K to 129K, while the Unemployment Rate edged lower to 4.2% in June.
Nevertheless, the crucial data pointed to softening labor conditions and comes on top of easing inflation fears in the face of the recent slump in Crude Oil prices, tempering expectations of higher-for-longer interest rates. In fact, traders shifted expectations from one to two Fed rate increases in 2026 to between zero and one hike. This, in turn, keeps the US Dollar (USD) depressed near a two-week low, touched on Thursday, which further drives flows toward the Gold. However, the uncertainty over US-Iran talks could limit USD losses.
The New York Times reported that US officials feared Israel may be hatching a plan to kill Iran’s senior negotiators during indirect peace talks. US officials believed that any assassination attempt could derail negotiations and trigger renewed fighting, the report added. Furthermore, Iran’s military headquarters warned that any US interference in the Strait of Hormuz will be met with a “decisive and swift response.” This keeps the geopolitical risk premium in play, which could support the safe-haven buck and cap the Gold.
Moving ahead, trading volumes are expected to remain low on Friday as the US stock and bond markets will remain closed in observance of Independence Day. Nevertheless, the aforementioned fundamental backdrop seems tilted firmly in favor of the XAU/USD bulls and backs the case for a further near-term appreciating move. Hence, any corrective pullback could be bought into and is more likely to remain limited.
XAU/USD 4-hour chart
Gold could climb further as break above 100-SMA on H4 and 23.6% Fibo. comes into play
From a technical perspective, an intraday breakout through the 100-period Simple Moving Average (SMA) and the 23.6% Fibonacci retracement level of the April-June downfall validates the near-term constructive outlook for the Gold price. That said, the Relative Strength Index (RSI) hovers near 68 and approaches overbought territory. Meanwhile, the Moving Average Convergence Divergence (MACD) stays positive and rising. Momentum indicators together suggest firm, but a potentially stretched bullish momentum.
Hence, any subsequent move up could face initial resistance near the 38.2% Fibo. level near $4,301.41. This is followed by the 50% retracement around $4,411.75 and the 61.8% level close to $4,522.09. Higher up, the 78.6% retracement at about $4,679.19 and the cycle high at $4,879.30 form a distant cap. On the downside, immediate support is seen at the 23.6% retracement near $4,164.89, with the 100-period SMA around $4,142.90 reinforcing the underlying floor. A deeper pullback could expose the broader structural base toward the $3,944.21 anchor.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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