Gold weakens further below $4,200 as hawkish Fed and Iran uncertainty boost USD
- Gold prolonged its downtrend for the third straight day on Friday amid a bullish US Dollar.
- The Fed’s hawkish tilt continues to underpin the buck and weigh on the non-yielding bullion.
- US Vice President cancels trip to Switzerland for Iran talks, further benefiting the Greenback.
Gold (XAU/USD) attracts sellers for the third straight day on Friday and weakens further below the $4,200 mark, hitting a fresh weekly low during the Asian session. The US Dollar (USD) stands firm near its highest level since May 2025 in the face of the US Federal Reserve's (Fed) hawkish tilt, which, in turn, is seen driving flows away from the non-yielding bullion. Furthermore, the uncertainty surrounding the next round of US-Iran negotiations turns out to be another factor that underpins the USD's reserve currency status and exerts additional pressure on the commodity.
The US central bank decided to keep the benchmark interest rate unchanged in its current 3.5% to 3.75% target range at the end of the first meeting under the new Fed Chair, Kevin Warsh. However, the so-called dot plot indicated that nine of the Fed's 19 committed members believed that they would need to raise the policy rate this year if inflation remains sticky. Furthermore, Kevin Warsh’s comments during the post-meeting press conference focused strongly on price stability, suggesting that the Fed might not rush to cut interest rates even in the face of declining growth.
According to the CME Group's FedWatch Tool, traders are now pricing in a 70% chance that the US central bank will hike rates in September. This keeps US Treasury bond yields elevated and continues to support the buck. Meanwhile, the optimism led by an interim US-Iran peace deal fades as key issues between the two countries remain unresolved. Moreover, US Vice President JD Vance canceled his planned trip for talks with Iran in Switzerland, saying that the meeting wasn’t yet finalized. Adding to this, Israeli air strikes in Lebanon threaten to unravel the US-Iran deal.
Any signs of renewed escalation of tensions in the Middle East and the lack of progress in US-Iran negotiations could further boost the safe-haven USD. Meanwhile, the liquidity is likely to remain low amid a US bank holiday in observance of Juneteenth National Independence Day. Nevertheless, the Gold seems poised to register losses for the third straight week as the market focus remains glued to further geopolitical developments.
XAU/USD daily chart
Gold bears have the upper hand while below 100-day EMA strong hurdle
From a technical perspective, this week's repeated failures to breakout through the 100-day Exponential Moving Average (EMA) and the subsequent slide favor the XAU/USD bears. Adding to this, the Relative Strength Index (RSI) hovers near 36, reflecting weak demand rather than outright oversold conditions. Furthermore, the Moving Average Convergence Divergence (MACD) indicator stays in negative territory with the line below its signal and a subdued histogram, which suggests ongoing downside pressure.
Meanwhile, the 200-day EMA at $4,358.53 is the first meaningful resistance, and bulls would need a daily close above this level to ease the current downside bias and hint at a more sustained recovery phase. Until then, the XAU/USD pair remains vulnerable to further declines, and further fresh selling is likely to be driven by momentum rather than by interaction with a specific technical floor on the daily chart.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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