Gold recovers from weekly low as USD softens ahead of FOMC Minutes

• Gold stages a modest recovery from a fresh weekly low amid the emergence of some USD selling.
• Oil-driven inflation risks remain supportive of elevated US bond yields and should limit USD losses.
• Traders await FOMC Minutes for interest-rate cues before placing directional bets on the bullion.

Gold (XAU/USD) rebounds from the weekly low, which it touched during the Asian session on Wednesday, and climbs above $4,350 in the last hour. The US Dollar (USD) attracts some sellers, stalling this week's goodish recovery from a two-month low, and helps the commodity reverse a part of the previous day's heavy losses. Traders, however, might opt to wait for more cues about the US Federal Reserve's (Fed) future policy path before placing fresh directional bets on the non-yielding yellow metal.

Hence, the focus will remain glued to the release of FOMC Minutes amid inflationary jitters stemming from rising energy prices due to the Middle East crisis. In fact, crude oil prices climb to a nearly three-week high amid the US-Iran standoff over the Strait of Hormuz. President Donald Trump has asserted that the US is not engaged in talks with Iran and that the naval blockade of Iranian ports remains in full force. Furthermore, Trump posted a map on Truth Social depicting the strategic Strait of Hormuz as the new US territory.

Meanwhile, Iranian Parliament Speaker Mohammad Bagher Ghalibaf said the critical waterway would remain closed until the US fulfills conditions agreed to a June memorandum of understanding. This keeps the geopolitical risk premium in play and supports crude oil prices, fueling inflation concerns and lifting the longer-end 30-year US bond yield to its highest level since June 2007. Furthermore, CME Group's FedWatch Tool indicates that traders are still pricing in around a 68% chance of a Fed rate hike by the year-end.

Analysts at ING highlight that the US Dollar index (DXY) has “rebounded from the range lows at 99.40,” underlining that “the Dollar is not quite ready to make a sustained break lower just yet.” They point to “higher energy prices and rising 30-year Treasury yields” as the two key factors providing near-term support, noting that “both of these, should they extend, could put a September hike from the Fed back on the agenda.”

On the energy side, ING observes that “news that Washington seemingly has little interest in extending the 60-day ceasefire with Iran has seen oil and gas prices creep higher again.” While “in which direction the next big leg for energy prices emerges is anyone's guess,” the bank stresses that “higher energy is a Dollar positive – both through US energy independence and the Fed's reaction function.”

Apart from this, persistent geopolitical uncertainties might hold back bearish traders from placing fresh bets on the safe-haven Greenback, warranting some caution before positioning for any further appreciation in the Gold price.

XAU/USD daily chart

Technical Analysis

From a technical perspective, the XAU/USD pair has been struggling to find acceptance above the 50% retracement level of the April-June decline and remains well below the 200-day Simple Moving Average (SMA). This keeps the near-term bias tilted bearish despite the metal consolidating near recent highs.

Meanwhile, the Moving Average Convergence Divergence (MACD) remains above zero, though it has slipped back toward the signal, and the Relative Strength Index (RSI) at 59.24 stays in positive territory. This suggests that bullish momentum is still present but vulnerable to further corrective pressure while the Gold price fails to reclaim the aforementioned resistance levels.

Overhead, the 50% retracement at $4,406 is the first hurdle, with the longer-term SMA at $4,509 and the 61.8% Fibonacci retracement at $4,519.36 reinforcing a broader ceiling. On the downside, initial support emerges at the 38.2% Fibo. retracement at $4,292, guarding the pullback before the 23.6% retracement at $4,152 and the structural floor around $3,925.

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