Gold (XAU/USD) edged higher during the Asian session on Wednesday, snapping a two-day losing streak after falling to sub-$4,100 levels, which marked a weekly trough the previous day. The precious metal had previously pulled back from levels just above $4,200, a two-week high set on Monday, but the current rebound is supported by subdued US Dollar (USD) demand as traders await the release of the June FOMC meeting Minutes [1].
Geopolitical tensions escalated after the US military launched strikes against Iran following attacks on three oil tankers in the Strait of Hormuz, threatening the fragile ceasefire. The US also withdrew a key concession that allowed Iran to sell oil internationally, triggering a sharp rally in crude oil prices and reviving energy-driven inflation fears. These developments have reinforced expectations of a 'higher for longer' policy stance from the US Federal Reserve (Fed) [1].
According to the CME Group's FedWatch Tool, traders are pricing in over an 80% chance that the Fed will deliver at least one 25 basis points rate hike by the end of this year. This hawkish outlook has pushed US Treasury yields higher, with the 10-year yield rising to 4.567% and the two-year yield climbing to 4.189% on Wednesday. These factors favor USD bulls and are expected to cap further gains in gold, which remains a non-yielding asset [1].
From a technical perspective, gold is entrenched in a downward-sloping channel and retains a bearish near-term bias below the 200-day Simple Moving Average (SMA). The MACD has turned positive, suggesting a short-term recovery attempt, but the RSI at 44.33 remains below the midline, reinforcing a cautious tone. Rallies are likely to face resistance near the channel’s upper boundary at $4,164.35, and a breakout above the 200-day SMA at $4,491.30 would be needed to confirm a sustained bullish reversal [1].
CONCLUSION
Gold's modest rebound is driven by subdued USD demand and heightened geopolitical risks, but a hawkish Fed outlook and rising US Treasury yields are expected to cap gains. Technical indicators suggest rallies will face resistance, and traders remain cautious ahead of key US monetary policy signals. The market takeaway is that gold may attract fresh sellers at higher levels unless a decisive breakout occurs.