XAU/USD – Price Analysis and Forecast: US-Iran Tensions Support the Dollar and Limit Gold's Recovery

Gold (XAU/USD) is struggling to recover after reaching an almost four-week low earlier on Wednesday, maintaining a moderately negative tone. However, the US dollar continues to strengthen, preventing the precious metal from recovering. Expectations among market participants for a September Fed rate hike are increasing. The escalation of the conflict in the Middle East has pushed oil prices to new highs since July 24, fueling concerns about inflation and reinforcing expectations of a Fed rate hike in September. This factor, together with geopolitical risks, is weighing on demand for gold.Tensions between the US and Iran have risen again following a US strike on Iranian missile installations near Larak Island in the Strait of Hormuz. This was the first US strike since late July and triggered an Iranian counteroffensive targeting US-linked facilities in the region. In addition, US Central Command (CENTCOM) reported that US forces had also carried out strikes against targets belonging to the Islamic Revolutionary Guard Corps (IRGC). In response, Iran escalated the confrontation and launched large-scale ballistic missile and drone attacks against US facilities in Bahrain, Kuwait, and Jordan. This creates an additional geopolitical risk that supports oil prices and strengthens the dollar as a safe-haven asset.Meanwhile, investors are concerned that high energy prices could once again exacerbate inflationary pressures, forcing major central banks, including the Fed, to adopt a more hawkish stance. Recent comments by Fed Chair Kevin Warsh at the Jackson Hole symposium should also be taken into account, as they are fueling expectations of a Fed rate hike in September. Adding concerns over government debt to the picture, the global bond sell-off is deepening, pushing the yield on benchmark 10-year US Treasury bonds to its highest level since January 2025. This is also viewed as a factor contributing to capital outflows from the precious metal and supporting the likelihood of a further decline in its value in the near term.

Societe Generale interest-rate strategists warn that the recent sell-off leaves the US Treasury yield curve vulnerable to further increases in long-term yields. According to them, "at the current pace, the yield on 10-year US Treasuries could reach 5%." They view this as confirmation that the bearish trend is continuing, as investors are increasingly considering how much additional term premium the market will require, while expectations regarding Fed policy remain tilted toward further tightening.

For better trading opportunities, traders may wait for Friday's US Nonfarm Payrolls (NFP) data. These labor market figures will provide additional signals regarding the future outlook for Fed monetary policy, which, in turn, will affect the dollar and provide fresh momentum for the precious metal.

Nevertheless, the current fundamental situation appears to favor bearish traders and suggests that the path of least resistance for gold remains to the downside. In this regard, any attempts at a recovery are more likely to be viewed as selling opportunities and carry the risk of a rapid decline.

From a technical perspective, gold has found support at the 200-day EMA, just above the round $4,300 level. A break below this level would be viewed as a new trigger for the bears. The next support is likely to be around $4,220. Upside resistance is provided by the 100-day SMA near $4,360. At the same time, the oscillators are mixed, so it can be said that gold is not ready to give up. However, the Relative Strength Index (RSI) has moved into negative territory, indicating weakness among the bulls.