Gold weakens back below $4,000 as Fed hike bets and Hormuz risks support safe-haven USD

• Gold attracts fresh sellers on Friday as Hormuz ship attack revives demand for the safe-haven USD.
• Bets for at least one Fed rate hike this year further support the Greenback and undermine the bullion.
• The XAU/USD pair is poised for its fourth weekly loss amid bearish fundamental and technical setups.

Gold (XAU/USD) struggles to capitalize on the previous day's modest recovery move and meets with a fresh supply during the Asian session on Friday amid the emergence of some US Dollar (USD) dip-buying. As investors look past key US inflation data, concerns about the fragile US-Iran peace agreement benefit the safe-haven Greenback. Adding to this, expectations that the US Federal Reserve (Fed) will hike interest rates this year help the USD to stall Thursday's pullback from its highest level since May 2025 and exert pressure on the bullion.

The US Bureau of Economic Analysis (BEA) reported on Thursday that the Personal Consumption Expenditures (PCE) Price Index accelerated from the 3.8% YoY rate to 4.1% in May. Moreover, the core gauge, which excludes volatile food and energy prices, rose 3.4%. Investors believed that inflation likely peaked last month or is ‌close to doing so in the face of the recent fall in Crude Oil prices to pre-war levels following an interim US-Iran peace deal. This led to a marginal uptick in bets that the Fed will hold rates steady, prompting some USD profit-taking.

Nevertheless, the CME Group's FedWatch Tool indicates that traders are still pricing in over an 80% chance that the US central bank will raise borrowing costs at least once by the end of this year. The bets were reaffirmed by comments from Chicago Fed President Austan Goolsbee that underlying inflation pressures are still too ‌high and trending in the wrong way. Moreover, New York Fed President ​John Williams pushed back his expectation of getting inflation back to the 2% target and said that inflation remains too high, though it is likely to moderate this year.

Meanwhile, reports that Iran’s Islamic Revolutionary Guard Corps (IRGC) attacked a Singapore-flagged cargo ship in the Strait of Hormuz reignited worries about the sustainability of the preliminary US-Iran peace deal. This further contributes to reviving demand for the USD, which, in turn, drags the Gold back below the $4,000 psychological mark. The XAU/USD pair remains on track to register losses for the fourth consecutive week. Moreover, the aforementioned fundamental backdrop favors bearish traders and backs the case for a further depreciating move.

XAU/USD 4-hour chart

Gold fades Thursday’s recovery from oversold conditions as bears retain control

From a technical perspective, Thursday's bounce from oversold conditions faltered ahead of the $4,050 horizontal support breakpoint-turned-resistance. This, along with the recent repeated failures near the 100-period Simple Moving Average (SMA) and weakness back below the $4,000 mark, validates the near-term negative outlook for the Gold. Meanwhile, the Moving Average Convergence Divergence (MACD) is turning modestly positive. However, the Relative Strength Index (RSI) near 36 stays below the neutral 50 line, hinting at lingering downside pressure rather than a decisive recovery.

On the topside, initial resistance is defined by the $4,050 region, above which, if cleared, could lift the XAU/USD pair to the $4,100 mark. Any further move up, however, might still be seen as a selling opportunity and remain capped near the 100-period SMA, at $4,231.08. Failure to challenge the said barrier should keep the near-term bias tilted to the downside.

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