Gold (XAU/USD) has stalled its recovery and is trading on the back foot for a second consecutive day, with prices around $4,130 during the European trading session on Tuesday [1]. The metal's upside remains limited due to a steady US Dollar and ongoing uncertainty regarding the Federal Reserve's (Fed) interest rate path [1]. Although a weaker-than-expected June US Nonfarm Payrolls (NFP) report last week eased near-term Fed rate hike fears and triggered a relief rally in gold from below the $4,000 mark, the broader hawkish Fed narrative persists [1]. Fed Governor Christopher Waller reaffirmed the central bank's commitment to its 2% inflation target, describing it as 'a credible pledge' [1].
According to the CME FedWatch Tool, traders are assigning a 75% probability that the Fed will leave borrowing costs unchanged at this month's meeting, while the odds of a September rate hike have decreased to 58% from 68% a week ago [1]. Elevated US Treasury yields and uncertainty over a potential US-Iran peace agreement continue to support the US Dollar, with the US Dollar Index (DXY) trading around 100.95 [1]. Geopolitical tensions also remain in focus after Iran's Islamic Revolutionary Guard Corps (IRGC) reportedly attacked a commercial vessel near the Strait of Hormuz, and Iranian Foreign Minister Abbas Araghchi stated that negotiations on a final agreement would not begin while threats persist [1].
Market participants are now awaiting the Federal Open Market Committee (FOMC) meeting minutes, due on Wednesday, for further guidance on the Fed's monetary policy trajectory, which could influence gold prices [1]. Meanwhile, the latest CFTC Commitments of Traders (COT) report showed that speculative traders increased their bullish bets on gold in the week ended June 30, with non-commercial net long positions rising to 194,000 contracts from 181,300 a week earlier [1].
From a technical perspective, XAU/USD maintains a bearish bias, trading below both the 200-day Simple Moving Average (SMA) at $4,489 and the 100-day SMA at $4,619 [1]. The Relative Strength Index (RSI) is near 44, indicating subdued momentum, while the Average Directional Index (ADX) around 38 suggests a still-established but not explosive downtrend [1]. Initial resistance is seen at $4,200, with key support at $3,950, where a break could extend the corrective phase lower [1].
CONCLUSION
Gold's recovery remains capped by persistent Fed uncertainty, a strong US Dollar, and geopolitical tensions. Market participants are closely watching upcoming FOMC minutes for further policy clues, while technical indicators suggest a bearish bias persists. The outlook for gold will likely hinge on evolving Fed expectations and geopolitical developments.