Gold (XAU/USD) is under significant pressure, heading for its third consecutive weekly loss as traders react to a more hawkish Federal Reserve stance and the latest developments in US-Iran relations. On Friday, XAU/USD traded around $4,157 after hitting a one-week low of $4,121, marking a nearly 25% decline from its all-time high. The precious metal is on track for a three-week losing streak, with losses extending for the third straight day, despite a somewhat softer US Dollar and improved market sentiment following the announcement of a 60-day Memorandum of Understanding (MoU) between the United States and Iran. However, ongoing clashes between Israel and Hezbollah continue to cast uncertainty over the Middle East peace outlook [1][2].
The Federal Reserve's hawkish monetary policy is the primary driver behind gold's decline. The Fed left interest rates unchanged at its latest meeting, but nearly half of FOMC members signaled at least one rate increase by year-end, and the new Fed Chair, Kevin Warsh, reiterated the central bank's commitment to bringing inflation back to its 2% target. Futures markets now price a 77% chance of a rate hike at the October meeting, up from less than 40% last week, and a 90% probability of at least a quarter-point tightening before year-end. Traders also see a 70% chance of a rate hike as soon as September, according to the CME FedWatch Tool. The Fed's hawkish tilt is attributed to a deteriorating inflation outlook, with annual inflation rising to 4.2% in May, well above the Fed's 2% target, partly due to a surge in oil prices [1][2].
Weak physical demand is compounding gold's struggles. Gold imports into India, one of the world's largest bullion consumers, have reportedly fallen nearly 70% since the government raised import duties to 15% from 6% last month. Despite these headwinds, steady central bank buying continues to underpin gold's longer-term outlook [1].
Technical analysis from both sources highlights persistent bearish momentum. XAU/USD remains below key resistance levels, with the daily chart showing a sequence of lower highs and lower lows. The Relative Strength Index (RSI) is around 35 or well below the 50 line, and the MACD is negative at -7.15, both indicating downside pressure. Immediate support is seen near $4,150 and the lower Bollinger band at $4,077, while the year-to-date low of $4,023 (June 11) and the late October 2025 low near $3,885 are identified as further downside targets. On the upside, resistance is noted at the Bollinger SMA middle band near $4,356–$4,370, with a more distant cap at $4,636 or the late May-early June highs at $4,585 [1][2].
The White House announced that US Vice President JD Vance delayed a planned trip to Switzerland for further talks with Iran, adding to the uncertainty around the peace process [1].
CONCLUSION
Gold prices are under sustained pressure as rising expectations for Federal Reserve rate hikes overshadow improved US-Iran relations and a softer US Dollar. With technical indicators pointing to further downside and weak physical demand, the market outlook for gold remains bearish in the near term. However, ongoing central bank buying and geopolitical uncertainties could provide some support in the longer run.