Gold prices climbed by approximately 0.92% on Friday, with XAU/USD trading at $4,013 after hitting a daily low of $3,959, as escalating tensions between the US and Iran drove energy prices higher and revived concerns about inflation and potential Federal Reserve interest rate hikes [1]. The market's risk sentiment soured due to news of further escalation in the Middle East, including reports that the Trump administration is sending additional refueling planes to Israel in anticipation of expanded military operations [1].
On the economic front, the University of Michigan Consumer Sentiment for July improved from 50.7 to 54, attributed to lower gasoline prices, while one-year inflation expectations fell from 4.6% in June to 4.2%, and five-year expectations remained steady at 3.3% [1]. Despite these improvements, Cleveland Fed President Beth Hammack maintained a hawkish stance, emphasizing that inflation remains too high and highlighting the strength of the labor market, growth, and consumer spending [1]. Fed Vice Chair Philip Jefferson also indicated openness to further rate hikes if disinflation stalls [1].
Market expectations reflect these concerns, with money markets pricing in a nearly 61% probability of a Fed rate increase at the October 28 meeting, while the July meeting is anticipated to result in steady rates with a 76% probability [1]. Looking ahead, key US economic data releases, including jobs data and S&P Global Flash PMIs, are expected next week as Fed officials enter their blackout period before the July 29 policy meeting [1].
From a technical perspective, gold remains in a bearish trend despite reclaiming the $4,000 level, with momentum indicators such as the Relative Strength Index (RSI) signaling further downside risk unless buyers overcome key resistance levels. Support is seen at $4,000 and $3,959, with further downside to $3,900 and $3,886 if these levels are breached. For a bullish reversal, gold would need to break above resistance between $4,125 and $4,175, with additional targets at the 50-day SMA ($4,291) and 200-day SMA ($4,495) [1].
CONCLUSION
Gold's recent gains are driven by renewed geopolitical tensions and inflation concerns, which have increased market expectations for a potential Fed rate hike later in the year. Despite the price recovery, technical indicators suggest a bearish outlook unless key resistance levels are surpassed. Investors are closely watching upcoming US economic data and Fed policy signals for further direction.