Gold Price Extends Weekly Pullback as Stronger US Dollar Weighs on XAU/USD
Gold prices are expected to extend their weekly pullback from monthly highs, falling for a fourth consecutive session on Friday amid sustained buying interest in the US Dollar. The US Dollar Index (DXY) climbed to its highest level since April 8, supported by a combination of geopolitical tensions and stronger US economic data.
Ongoing uncertainty surrounding stalled US-Iran peace negotiations, particularly disagreements over Tehran’s nuclear program and the strategic Strait of Hormuz, continues to keep geopolitical risks elevated. This backdrop has strengthened demand for the safe-haven US Dollar while pressuring non-yielding assets such as gold.
Technical Analysis: Gold Faces Bearish Momentum Below Key Support
From a technical perspective, repeated failures near the $4,765-$4,770 resistance zone have formed a bearish double-top pattern. A decisive break below the $4,670 confluence area — which includes the 200-hour Simple Moving Average (SMA) and the 38.2% Fibonacci retracement of the rally from around $4,500 — confirmed the downside outlook.
The Moving Average Convergence Divergence (MACD) indicator remains deeply in negative territory at -5.58, reinforcing bearish momentum. Meanwhile, the Relative Strength Index (RSI) has dropped to 26.5, signaling oversold conditions that may slow the decline but are not yet strong enough to reverse the broader bearish trend.
On the downside, immediate support is located at the 61.8% Fibonacci retracement level of $4,605.89, followed by secondary support at the 78.6% retracement level near $4,560.62 and the previous swing low around $4,502.95.
On the upside, initial resistance is seen at the 50% retracement level of $4,637.69. Additional resistance appears within the broader consolidation zone between the 38.2% retracement at $4,669.49 and the 200-hour SMA at $4,673.40. Further recovery attempts may face stronger barriers near the 23.6% Fibonacci retracement around $4,708.83.
Fundamental Outlook: Hawkish Fed Expectations Boost USD
Rising expectations for another interest rate hike by the US Federal Reserve continue to support the US Dollar and weaken demand for gold bullion.
US President Donald Trump stated in an interview aired Thursday on Fox News that he would not remain patient with Iran and urged Tehran to reach an agreement. Meanwhile, reports of a commercial vessel being seized by Iranian personnel near the coast of the United Arab Emirates raised concerns over energy supply flows through the critical Strait of Hormuz, supporting elevated crude oil prices.
Additionally, hotter-than-expected US inflation data and stronger US Retail Sales figures released this week reinforced expectations of a more hawkish Federal Reserve stance. US headline Consumer Price Index (CPI) inflation accelerated to 3.8% YoY in April, while core CPI rose to 2.8%. The US Producer Price Index (PPI) also surged 1.4% last month, pushing the annual rate to 6.0%.
Furthermore, US Retail Sales increased for the third straight month in April, highlighting resilient consumer spending despite mounting inflationary pressures. According to the CME Group FedWatch Tool, traders are now pricing in nearly a 40% probability of another Fed rate hike before year-end. This outlook continues to strengthen the US Dollar and adds pressure to gold prices.
US-China Talks and Middle East Tensions Could Drive Market Volatility
Market sentiment toward US-China relations has improved slightly following high-level talks between President Trump and Chinese President Xi Jinping. However, Xi warned that mishandling the Taiwan issue could trigger “confrontation or even conflict” between the two global powers.
Trump and Xi are scheduled to continue their discussions for a second day in Beijing, and further headlines could generate additional volatility across global financial markets. At the same time, investors remain focused on developments in the Middle East crisis for short-term trading opportunities.
Despite ongoing geopolitical uncertainty, the broader fundamental backdrop continues to favor sellers, leaving the XAU/USD pair on track to post weekly losses.