Gold drifts lower as Fed hike bets and geopolitics lift USD ahead of Trump-Xi summit
- Gold attracts fresh sellers on Monday as hawkish Fed bets and geopolitics revive USD demand.
- The recent pullback in US bond yields might cap USD gains and lend some support to the bullion.
- Traders might also opt to move to the sidelines ahead of the key Trump-Xi meeting on Thursday.
Gold (XAU/USD) kicks off the new week on a weaker note following Friday's failure near the $4,400 mark, stalling a two-day-old recovery move from a six-week low touched last Wednesday. The commodity currently trades near the $4,350 level as traders await further developments surrounding the Middle East crisis and their implications for inflation. This would influence interest rate expectations and, in turn, drive the non-yielding bullion.
Yemen's Iran-backed Houthi forces attacked sensitive sites with missiles and drones in the Saudi capital of Riyadh on Saturday. Moreover, Iran ruled out reopening the Strait of Hormuz or returning to negotiations with the US until Washington meets its conditions – including an end to the war on all fronts, the release of frozen Iranian assets and the lifting of the US naval blockade on Iranian ports. Meanwhile, US President Donald Trump said that he is in "deciding mode" over the Iran war, warning that big things are going to happen in the near future, keeping the geopolitical risk premium in play.
Adding to this, the US Federal Reserve's (Fed) hawkish outlook helps the safe-haven US Dollar (USD) attract some dip-buyers and stall Friday's retracement slide from the highest level since late May. In fact, the so-called dot plot revealed that Fed officials expect one more rate increase this year following the first hike in over three years. This, in turn, is seen as a key factor exerting some pressure on gold. However, the recent pullback in US bond yields from multi-year highs might hold back USD bulls from placing aggressive bets and help limit any further losses for the precious metal.
Fed tightening risks seen skewed to the upside as US resilience persists
Analysts at Nordea highlight that the US economy “remains resilient,” with “inflationary pressures” showing “few signs of easing” and the labour market “also holding up well.” In their view, this combination strengthens “the case for a more restrictive monetary policy stance.” Nordea reiterates that it “maintain[s] our forecast for two more hikes,” but cautions that “we see the risks as tilted to the upside,” underscoring the possibility that the Fed may ultimately need to do more than currently anticipated.
A recovery in shipments from Saudi Arabia dragged crude oil prices to an over one-week low, helping alleviate immediate fears of runaway inflation and keeping the yield on the benchmark 10-year US Treasury below the 5% threshold. Traders also seem hesitant ahead of the crucial meeting between US President Donald Trump and his Chinese counterpart Xi Jinping on Thursday. Apart from this, comments from influential FOMC members will drive the USD and the Gold price. In the meantime, the mixed fundamental backdrop warrants caution before positioning for a firm near-term direction.
XAU/USD daily chart
Technical Analysis
The XAU/USD pair holds below the 100-day Exponential Moving Average (EMA) and the 38.2% Fibonacci retracement level of the June-August swing low, keeping a mildly bearish bias. Meanwhile, the Relative Strength Index (RSI) sits near 49, signaling neutral momentum. That said, the Moving Average Convergence Divergence (MACD) remains in negative territory with a slightly negative reading, which hints that upside attempts could continue to be capped by nearby overhead levels.
On the topside, initial resistance is defined by the 100-day EMA at $4,367, with the 38.2% Fibo. retracement at $4,406 acting as the next obstacle, ahead of a stronger barrier at the 23.6% retracement near $4,515. On the downside, immediate support emerges at the 50.0% retracement around $4,317, followed by deeper cushions at the 61.8% level near $4,229 and then the 78.6% retracement around $4,103, with the prior swing low zone at $3,942 marking a more distant floor if selling pressure resumes.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar Price Last 7 Days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.07% | 1.12% | 2.25% | 0.98% | 0.51% | 1.62% | 0.86% | |
| EUR | -1.07% | 0.03% | 1.14% | -0.09% | -0.55% | 0.54% | -0.22% | |
| GBP | -1.12% | -0.03% | 1.13% | -0.14% | -0.58% | 0.52% | -0.28% | |
| JPY | -2.25% | -1.14% | -1.13% | -1.25% | -1.73% | -0.67% | -1.42% | |
| CAD | -0.98% | 0.09% | 0.14% | 1.25% | -0.43% | 0.64% | -0.16% | |
| AUD | -0.51% | 0.55% | 0.58% | 1.73% | 0.43% | 1.10% | 0.32% | |
| NZD | -1.62% | -0.54% | -0.52% | 0.67% | -0.64% | -1.10% | -0.79% | |
| CHF | -0.86% | 0.22% | 0.28% | 1.42% | 0.16% | -0.32% | 0.79% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
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