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Gold Remains Under Pressure as Iran Risks and Hawkish Fed Bets Support US Dollar
Gold prices struggled to extend modest gains during the Asian session on Wednesday, remaining vulnerable near the key psychological level of $4,500 as persistent geopolitical uncertainty continued to strengthen the US Dollar. In addition, growing inflation concerns have reinforced expectations of a more hawkish stance from major central banks, including the US Federal Reserve, further weakening demand for the non-yielding precious metal.
From a technical perspective, gold maintains a mildly bearish short-term outlook following this week’s rejection near the critical horizontal resistance around $4,580. That region also aligns with the 100-period Exponential Moving Average (EMA) on the 4-hour chart and is expected to serve as a major pivot zone. A sustained breakout above this barrier would be needed to ease the current bearish structure and pave the way for a stronger recovery.
Meanwhile, the Relative Strength Index (RSI) remains below the neutral level near 41, while the Moving Average Convergence Divergence (MACD) continues to trade in negative territory. These momentum indicators suggest ongoing downside pressure despite the absence of fresh extreme bearish momentum. However, a decisive break below the monthly swing low near the $4,450 area could trigger a deeper corrective decline for gold prices.
US forces launched what was described as a self-defense strike in southern Iran on Monday, targeting Iranian missile sites and vessels allegedly attempting to deploy naval mines. Iran’s Foreign Ministry condemned the attacks as a violation of the ceasefire agreement that has been in place since early April.
In addition, the Islamic Revolutionary Guard Corps (IRGC) stated that Iran retains the legitimate right to retaliate against any ceasefire violations by the United States. Iranian Supreme Leader Mojtaba Khamenei also warned that regional countries would no longer serve as safe zones for US military bases. These developments continue to sustain geopolitical risk premiums and support the US Dollar’s safe-haven status, placing additional pressure on gold prices.
At the same time, escalating US-Iran tensions, combined with the effective closure of the Strait of Hormuz and the US blockade of Iranian ports, could continue supporting crude oil prices and fueling inflation concerns globally. This environment has encouraged major central banks to maintain a hawkish outlook, with the Reserve Bank of Australia already raising interest rates in May, while the European Central Bank, Bank of Japan, and Reserve Bank of New Zealand are all expected to deliver rate hikes later this year.
Market participants are also pricing in roughly a 50% probability of a Federal Reserve rate hike in December. This outlook provides additional support for the Greenback and limits upside momentum for non-yielding assets such as gold.
Looking ahead, no major US economic data releases are scheduled for Wednesday, leaving the US Dollar sensitive to comments from influential Federal Open Market Committee (FOMC) members and fresh developments surrounding the Middle East crisis. However, traders are likely to remain cautious ahead of Thursday’s release of the US Personal Consumption Expenditures (PCE) Price Index and the second estimate of US Gross Domestic Product (GDP).
Given the current fundamental backdrop, market conditions continue to favor bearish sentiment toward XAU/USD, suggesting caution before anticipating any significant intraday rebound in gold prices.