Gold declines as reviving inflation fears outweigh receding Fed rate hike bets and soft USD

• Gold meets with a fresh supply as reviving inflationary fears support US Treasury bond yields.
• Receding Fed rate hike bets keep USD bulls on the defensive and support the precious metal.
• The technical setup seems tilted in favor of bears and backs the case for deeper losses.

Gold (XAU/USD) attracts sellers for the second straight day and drops to the $4,125-$4,124 region during the Asian session on Tuesday. Crude oil prices edge higher amid renewed tensions in the Strait of Hormuz, reviving inflationary concerns. This, in turn, acts as a tailwind for the US Treasury bond yields and turns out to be a key factor driving flows away from the non-yielding yellow metal. That said, receding US Federal Reserve (Fed) rate hike bets and the lack of US Dollar (USD) buying could help limit deeper losses for the bullion.

Tensions in the Strait of Hormuz remain high as Tehran attempts to cement strategic control and aims to collect fees from ships transiting through the critical waterway. Despite strong opposition from the US, Iran insists that the fees are for security, vessel supervision, and environmental protection, rather than tolls. Adding to this, a maritime agency reported that an oil tanker was struck by an unidentified projectile while transiting through the strait, complicating a fragile US-Iran peace deal and offering some support to crude oil prices.

Meanwhile, the soft US Nonfarm Payrolls (NFP) report for June tempered market bets that the US central bank will raise borrowing costs. In fact, traders shifted expectations from one to two Fed rate increases in 2026 to between zero and one hike. This keeps the USD bulls on the defensive and might hold back traders from placing aggressive bearish bets around the Gold. On the economic data front, the US ISM Services PMI eased to 54.0 in June from 54.5 in the previous month, matching consensus estimates and doing little to impress the USD bulls.

Investors, however, seem hesitant to place aggressive bets and opt to wait for more cues about the Fed’s policy path. Hence, the focus now shifts to the release of the FOMC Minutes on Wednesday. Apart from this, geopolitical developments would drive the USD demand and provide some impetus to the Gold. In the meantime, the aforementioned fundamental backdrop makes it prudent to wait for strong follow-through selling before confirming that the recent recovery move from the year-to-date low, touched last week, has run out of steam.

XAU/USD daily chart

Gold retains bearish bias within descending channel and below 200-day SMA

The XAU/USD pair keeps a bearish near-term bias below the 200-day Simple Moving Average (SMA) at $4,489.97 and within a descending channel. However, the Moving Average Convergence Divergence (MACD) indicator has turned positive, with the MACD line above the signal line and an expanding positive histogram. This suggests recovering bullish momentum, though not yet strong enough to challenge the dominant overhead structure. Moreover, the Relative Strength Index (RSI) at 44.16 remains below the 50 line, hinting at a still neutral to mildly bearish tone despite the recent bounce.

Meanwhile, $4,100 could act as a tentative floor ahead of more meaningful support at the channel bottom near $3,844.34, where a deeper slide would meet firmer demand. On the topside, immediate resistance appears at the top boundary of the descending channel near $4,296.64, where any recovery is likely to stall initially. This is followed by the 200-day SMA at $4,489.97 and a higher structural barrier near $4,572.41.

Register a Revolut Business Account