Gold Price Forecast: Hawkish Fed Triggers Gold Plunge, Can US-Iran Agreement Push Gold Past $4,360?

TradingKey - During today's (June 18) Asian session, gold prices ( XAUUSD) maintained an intraday rebound, boosted by the positive prospect of a potential early signing of the US-Iran agreement, recovering most of the losses from Wednesday's plunge triggered by the Federal Reserve's hawkish stance. During the session, the price rebounded from Wednesday's low of $4,219 to $4,329.9. Technical analysis indicates that $4,360 is key resistance for bulls in the near term, and only a breakout above this level will open up further upside potential for gold prices.

The Federal Reserve's hawkish stance weighs on gold prices, while the US-Iran agreement provides short-term support.

On June 17, Eastern Time, the Federal Reserve announced its latest interest rate decision, maintaining the target range for the federal funds rate unchanged at 3.50% to 3.75%. The Fed emphasized that inflation remains above its 2% target, with some price pressures stemming from energy supply shocks triggered by the conflict in the Middle East, while economic activity continues to expand at a steady pace and the labor market has not deteriorated significantly. This suggests the central bank is currently in no rush to pivot toward monetary easing.

For the market, holding rates steady was in line with expectations, making the dot plot and the remarks from newly appointed Fed Chair Warsh the key focus. The latest dot plot revealed that among the 18 officials submitting forecasts, nine expect at least one rate hike this year (including six who foresee two or more hikes), while only one official remains supportive of a rate cut. Subsequently, Warsh stated at a press conference that the Fed is firmly committed to its 2% inflation target, noting that with inflation still elevated and the economy remaining resilient, the central bank will not rush to ease policy.

The market had previously bet on potential Fed rate cuts this year, but those expectations have now sharply reversed, with traders beginning to reprice the risk of rate hikes. This exerts direct pressure on gold. As a non-yielding asset, gold typically loses appeal when markets anticipate further rate hikes, which generally support the U.S. dollar and Treasury yields. Consequently, the opportunity cost of holding gold rises, naturally limiting its upside potential.

Notably, however, the U.S. and Iran have reached a memorandum of understanding. Iran disclosed the details of the interim agreement, which specifically include extending the ceasefire, promoting the resumption of transit through the Strait of Hormuz, and securing a 60-day negotiation window for a final agreement. Following the news, gold prices maintained their intraday rebound, hitting a high of $4,329.9, representing a gain of over 1%.

Gold Price Trend Analysis: Has Gold Stopped Falling? The Key Lies in Whether It Can Break $4,360

Gold Price Daily Chart, Source: TradingView

According to gold's daily chart, under the influence of hawkish Federal Reserve policy expectations, gold prices fell sharply on Wednesday, dropping more than $100 in the short term. However, boosted by the reaching of a U.S.-Iran agreement, it quickly recouped yesterday's losses today, with the market exhibiting a mix of both bullish and bearish factors.

From a price action perspective, gold climbed to $4,382.15 yesterday but closed at $4,257.98, indicating that the key resistance level of $4,360 remains unbroken and that bullish momentum has taken a significant hit. Although the rebound persisted during the Asian session today, prices began to fluctuate lower during the European session, suggesting that market sentiment still leans bearish.

At present, the primary key resistance level above for gold remains at $4,360. If gold can effectively break and hold above this level, it will open up upside room toward $4,500. Conversely, if it continues to face pressure below $4,360, gold may extend its prior downward trend, pulling back further to test the key psychological $4,000 level.