Gold retreats from June highs as hawkish FOMC minutes and US-Iran tensions support USD

• Gold retreats slightly from June highs as a modest USD uptick prompts some profit-taking.
• Hawkish FOMC Minutes, oil-driven inflation risks, and the US-Iran standoff support the USD.
• Retreating US bond yields might cap further USD gains and limit losses for the yellow metal.

Gold (XAU/USD) eases from its highest level since early June, touched during the Asian session this Thursday, eroding a part of the previous day's strong gains of over 3%. Hawkish FOMC Minutes released on Wednesday, along with persistent geopolitical uncertainties, ease retreating US bond yields-led US Dollar (USD) selling bias, which turns out to be a key factor exerting some pressure on the bullion.

In fact, minutes from the July 28-29 FOMC meeting revealed that Federal Reserve officials indicated they would need to raise interest rates soon unless there was more progress on bringing down inflation. Meanwhile, the recent US macro data releases have shown modest price increases on a monthly basis in July, though inflation remains well above the Federal Reserve's (Fed) 2% target. Moreover, investors remain worried that higher energy prices due to the Middle East crisis will rekindle inflationary pressures. This keeps bets for at least one Fed rate hike in 2026 on the table. Apart from this, the US-Iran impasse offers some support to the safe-haven USD, which, in turn, is seen as undermining the non-yielding Gold.

In the latest development, President Donald Trump said the US will launch the most crushing economic operation against Iran and threatened severe financial penalties on any nation that helps Tehran evade sanctions or does business with Iran. This comes as the US and Iran remain deadlocked over the Strait of Hormuz, which keeps the war-risk premium in play. However, sliding US bond yields might hold back USD bulls from placing aggressive bets, warranting caution before confirming that the gold price has topped out in the near-term and positioning for a corrective decline.

The US Department of the Treasury stepped in to provide relief to bond markets and announced on Wednesday that it would at least double buyback operations for long-dated government debt starting in September. This led the 30-year yield to tumble from its highest level since June 2007. According to TD Securities, the "announcement that the US Treasury is increasing the size of liquidity support buyback operations" has "given metals a jolt of life," with the expanded programme helping to underpin renewed interest in precious metals such as Gold.

Traders now look forward to Thursday's US economic docket, featuring the release of the Philly Fed Manufacturing Index and Weekly Initial Jobless Claims. This, along with speeches from influential FOMC members and the incoming geopolitical headlines, will drive the USD and the Gold price.

XAU/USD daily chart

Technical Analysis

The XAU/USD pair faces rejection near the $4,510-$4,515 confluence – comprising the 200-day Simple Moving Average (SMA) and the 61.8% Fibonacci retracement of the April-June decline. This hints at waning upside scope in the short run. That said, the Relative Strength Index (RSI) at 65.17 hovers near overbought territory while the Moving Average Convergence Divergence (MACD) indicator remains in positive terrain, suggesting underlying bullish momentum.

Meanwhile, initial support aligns with the 50.0% retracement at $4,404, ahead of a deeper structural cushion at the 38.2% level near $4,295 and the 23.6% Fibo. at $4,159, where buyers could attempt to stabilize any corrective slide. On the topside, bulls need to wait for a move beyond the $4,510-$4,515 confluence before positioning for additional gains toward the 78.6% Fibo. level at $4,670 and ultimately the cycle high near $4,869.

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