Gold extends slide as inflation fears lift Fed hike bets and USD amid Trump's tariffs

• Gold drifts for the second straight day on Friday and seems vulnerable to further decline.
• Elevated oil prices fuel inflation fears and bolster Fed hike bets, undermining the bullion.
• Escalating US-Iran tensions and Trump’s tariffs benefit the USD, contributing to the slide.

Gold (XAU/USD) attracts sellers for the second straight day on Friday and weakens further below the $4,050 level during the Asian session. Escalating US-Iran tensions remain supportive of elevated crude oil prices, fueling inflation fears and bolstering expectations of higher-for-longer US interest rates. This, in turn, helps the US Dollar (USD) to preserve its strong weekly gains to a nearly one-month high, touched on Thursday, and turns out to be a key factor undermining the non-yielding bullion.

The US military announced that it has completed another round of strikes against Iran on Thursday, marking the 13th straight night of operations. In a statement, US Central Command (CENTCOM) said that its forces targeted “Iranian military command centers, drone storage facilities, communication networks, coastal surveillance sites, and maritime capabilities.” The attack was aimed at diminishing further the threat Iran poses to civilian mariners and commercial vessels transiting the Strait of Hormuz.

The latest strikes come amid a widening regional confrontation, with Iran and its allies launching retaliatory strikes against US-linked military assets in Kuwait, Bahrain and Jordan. Moreover, Iran-aligned Houthi forces struck two Saudi oil tankers in the Red Sea, describing the action as part of a naval blockade against Saudi Arabia and extending the Middle East war to a second major shipping chokepoint. This exacerbates supply disruption concerns and lifts crude oil prices to a fresh high since June 11.

Investors remain worried that elevated crude oil prices will rekindle inflationary pressure and force major central banks, including the US Federal Reserve (Fed), to adopt a more hawkish stance. Adding to this, data released on Thursday showed that US Jobless Claims fell to the lowest level since September 1969, pointing to a resilient labor market. This should allow Fed officials to keep their focus on containing inflation, which backs the case for at least one interest rate hike move by the end of this year.

Meanwhile, US President Donald Trump imposed sweeping new tariffs ranging from 10% to 12.5% on 60 of the country's key trading partners, covering 99.4% of US imports. The latest developments threaten to reignite a global trade war, tempering investors' appetite for riskier assets and further benefiting the Greenback's reserve currency status. This, in turn, backs the case for an extension of the XAU/USD pair's pullback from a two-week top, set on Wednesday, as the focus shifts to the FOMC next week.

XAU/USD 4-hour chart

Gold turns vulnerable after failing near 200-EMA on H4

From a technical perspective, this week's failure near the 200-period Exponential Moving Average (EMA) and the subsequent fall suggest that the recent bounce from the $3,960-$3,959 area, or the monthly low, has run out of steam. Adding to this, the Moving Average Convergence Divergence (MACD) indicator is in negative territory, with the line deeply below zero, while the Relative Strength Index (RSI) sits near 41, hinting that downside momentum remains in play.

Some follow-through selling below the $4,000 psychological mark and the $3,980-$3,975 support will reaffirm the negative outlook, setting the stage for deeper losses. Meanwhile, intraday floors are likely to be determined by prior price reactions rather than well-established indicator-based levels. On the topside, initial resistance is defined by the 200-period EMA at $4,158.08, and only a sustained recovery above this medium-term barrier would start to ease the prevailing downside pressure.

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