Gold price faces rejection near $3,400 amid some USD buying; lacks follow-through

• Gold price struggles to capitalize on an Asian session move above the $3,400 mark.

• A modest USD strength turns out to be a key factor that undermines the XAU/USD pair.

• Geopolitical risks and Fed rate cut bets act as a tailwind for the non-yielding commodity.

Gold price (XAU/USD) attracts fresh sellers following an Asian session uptick to levels just above the $3,400 mark and turns lower for the second straight day on Tuesday. A modest US Dollar (USD) uptick is seen as a key factor acting as a headwind for the commodity. The downside, however, seems limited amid rising geopolitical tensions in the Middle East and bets that the Federal Reserve (Fed) will cut interest rates further in 2025.

Meanwhile, an aerial war between Israel and Iran enters its fifth day, raising the risk of a broader regional conflict in the Middle East. This keeps the geopolitical risk premium in play and should contribute to limiting losses for the safe-haven Gold price. Traders might also opt to wait for the outcome of a two-day FOMC policy meeting on Wednesday before placing fresh directional bets around the non-yielding yellow metal.

Daily Digest Market Movers: Gold price bulls seem reluctant amid modest USD uptick; downside seems cushioned

Israel struck Iran’s state-run television station on Monday, while Iran said that it is preparing for the largest and the most intense missile attack in history on Israeli soil. US President Donald Trump left the G7 Summit a day early because of the Middle East situation and has requested the National Security Council to convene in the Situation Room.

Three tankers are reportedly on fire in the Gulf of Oman near the Strait of Hormuz, raising concerns of a possible repeat of the 2019 attacks attributed to Iran. This raises the risk of a further escalation of geopolitical tensions in the Middle East and assists the safe-haven Gold price to gain some positive traction during the Asian session on Tuesday.

The US Dollar edges higher amid repositioning trades ahead of the crucial two-day FOMC policy meeting starting later today and acts as a headwind for the precious metal. The Federal Reserve is widely expected to maintain the status quo and keep its benchmark rate unchanged amid concern that Trump's tariffs could push up consumer prices.

Meanwhile, the USD uptick lacks bullish conviction on the back of rising bets that the Fed will resume its rate-cutting cycle in September. Hence, the accompanying policy statement and Fed Chair Jerome Powell's comments during the post-meeting press conference will be scrutinized closely for cues about the future rate-cut path.

This, in turn, will help in determining the next leg of a directional move for the USD and the non-yielding yellow metal. In the meantime, persistent trade-related uncertainties and geopolitical risks stemming from the worsening Iran-Israel conflict might continue to act as a tailwind for the safe-haven commodity.

Gold price is more likely to attract dip-buyers  near the lower ascending channel boundary

From a technical perspective, the formation of an ascending channel points to a well-established short-term uptrend. Adding to this, positive oscillators on the daily chart back the case for the emergence of dip-buying, which should help limit the downside for the Gold price near the $3,340-3,335 area, or the lower boundary of the trend channel. A convincing break below the latter would negate any near-term positive outlook and shift the bias in favor of bearish traders.

On the flip side, the $3,400 round figure now seems to have emerged as an immediate hurdle, above which the Gold price could climb to the $3,434-3,435 region. Some follow-through buying, leading to a subsequent strength beyond the $3,451-3,452 area, or the multi-week top touched on Monday, should allow the Gold price to challenge the all-time peak, around the $3,500 psychological mark touched in April. The said handle coincides with the ascending channel barrier, which if cleared would pave the way for a further appreciating move.