FX.co ★ MMC | XAU/USD, GOLD

Gold (XAU/USD) struggles to profit from a slight upturn during the Asian session on Tuesday, falling to its lowest level since August 4 and hovering just below $4,100, the level it hit on Monday. In addition, the fundamentally bearish environment suggests the trend bias remains toward further declines in the precious metal. The Fed's hawkish policy, high US yields, and geopolitical tensions keep the US Dollar (USD) near a two-month high, reaffirming the bearish scenario for gold. The Fed announced its widely anticipated 25 bps interest rate hike—the first since March 2022—this month and showed its determination to contain persistently high inflation. Several FOMC members also said the next rate hike could be warranted before the end of 2026. According to CME Group's FedWatch Tool, the market currently expects the central bank to raise borrowing costs again next month, given the risk of higher inflation fueled by higher oil prices linked to Middle Eastern tensions. Fed's Cook speaks with a relatively hawkish tone, with an FXS Speechtracker score of 7 out of 10, slightly above the average baseline of 6.9 out of 10. Cook points to ongoing inflationary pressures in the coming months due to AI and conflicts in the Middle East, while saying any further rate hikes will depend on incoming inflation and employment figures, as the current labour market is well equipped to handle rising rates. Despite acknowledging that AI-powered productivity gains will help drive some disinflation over the next few years, the point that this will come too late to reverse the trend toward rising inflation this year adds to the overall hawkish message. FXS Fed Sentiment Index dropped by 0.63 points to 146.89, suggesting a small retreat in the hawkish sentiment in light of the above-baseline speech score. Given that the FXS Fed Sentiment Index remains significantly above the neutral level of 100, the Fed is clearly in hawkish mode, and any potential rate hikes and a higher-for-longer strategy still support the dollar, despite somewhat lower market expectations. In the latest turn of events, President Donald Trump of the United States has refused the peace offer made by Iran, which aimed at solving their military standoff and reopening the Strait of Hormuz forthwith upon satisfying the demands put forward. Besides, he has also denied the claims of the news portal Axios according to which he had assured Iran of lifting the sanctions against it and freeing its locked assets in exchange for some concrete actions from their side on the issue of their nuclear program. Actually, the yield on the US 30-year government bond soared to its highest level since mid-May 2004, the key 10-year yield climbed to its highest level since mid-June 2007, and the 2-year yield climbed to its highest level since May 2024. In this regard, it will support the USD bulls; therefore, it would be better to wait for follow-up buying to confirm the bottom formation for the Gold price. Investors may also wait for this week's key US macro releases before making any directional bets on XAU/USD. The US Personal Consumption Expenditures (PCE) Price Index, the US Federal Reserve's favourite inflation indicator, is due on Wednesday, along with the second reading of Q2 GDP growth. The US Institute of Supply Management Manufacturing Purchasing Managers' Index (ISM Manufacturing PMI) is also due on Thursday. Still, traders' attention will be glued to the US Non-farm Payrolls (NFP) data, due on Friday. In addition, speeches by key FOMC speakers will be watched for further clues on the US monetary policy outlook, which in turn will help the USD move and impact Gold prices. XAU/USD remains bearish in the short term amid the breakdown below the key support level at the 200-day Exponential Moving Average (EMA) of $4,310 and mid-range Fibonacci retracement levels. Gold fell below the 61.8% retracement at $4,227, staying confined to the lower part of the recent trading range. As for the technical indicators, the Moving Average Convergence Divergence (MACD) remains negative at 26.21, whereas the Relative Strength Index (RSI) is slightly above the oversold area at 36.40. Further upside momentum can develop, but in the near term, it will likely face the first hurdle near the 61.8% Fibo. Retracement at $4,227, with a thicker barrier expected in case of rising prices beyond the current level due to the presence of the 200-day EMA at $4,310 and the 50% retracement at $4,316. Next resistance barriers include $4,406 and $4,517, followed by the recent swing high near $4,696. The immediate support level could come in at $4,099 at the 78.6% Fibonacci retracement, with the next stronger level seen at the $3,937 swing low.