• Gold attracted some dip-buyers on Friday amid a modest USD downtick, though the upside seems capped.
• Bets for at least one Fed rate hike this year and Hormuz ship attack could support the buck and cap the bullion.
• The XAU/USD pair remains on track for its fourth weekly loss amid bearish fundamental and technical setups.

Gold (XAU/USD) struggles to build on its intraday bounce of around $50 from the $3,983-$3982 region and flat lines below the $4,050 level during the first half of the European session on Friday. The US Dollar (USD) remains depressed below its highest level since May 2025 set on Thursday, amid receding Federal Reserve (Fed) rate-hike bets. This, in turn, lends some support to the commodity. The lack of follow-through buying, however, warrants caution for bullish traders and positioning for an extension of the overnight recovery from the vicinity of the lowest level since November 2025, touched on Wednesday.

The US Bureau of Economic Analysis (BEA) reported on Thursday that the Personal Consumption Expenditures (PCE) Price Index accelerated from the 3.8% YoY rate to 4.1% in May. Moreover, the core gauge, which excludes volatile food and energy prices, rose 3.4%. Investors believed that inflation likely peaked last month or is ‌close to doing so in the face of the recent fall in Crude Oil prices to pre-war levels following an interim US-Iran peace deal. This led to a marginal uptick in bets that the Fed will hold rates steady, prompting some USD profit-taking.

Nevertheless, the CME Group's FedWatch Tool indicates that traders are still pricing in over an 80% chance that the US central bank will raise borrowing costs at least once by the end of this year. The bets were reaffirmed by comments from Chicago Fed President Austan Goolsbee that underlying inflation pressures are still too ‌high and trending in the wrong way. Moreover, New York Fed President ​John Williams pushed back his expectation of getting inflation back to the 2% target and said that inflation remains too high, though it is likely to moderate this year.

Meanwhile, reports that Iran’s Islamic Revolutionary Guard Corps (IRGC) attacked a Singapore-flagged cargo ship in the Strait of Hormuz reignited worries about the sustainability of the preliminary US-Iran peace deal. This, in turn, should help limit any meaningful losses for the USD and cap the upside for the Gold price. Moreover, the aforementioned fundamental backdrop favors bearish traders and backs the case for the emergence of fresh selling at higher levels. Nevertheless, the XAU/USD pair remains on track to register losses for the fourth consecutive week.

XAU/USD 4-hour chart

Gold needs to surpass $4,050 hurdle to back case for further gains

From a technical perspective, Thursday's bounce from oversold conditions faltered ahead of the $4,050 horizontal support breakpoint-turned-resistance. This, along with the recent repeated failures near the 100-period Simple Moving Average (SMA) and weakness back below the $4,000 mark, validates the near-term negative outlook for the Gold. Meanwhile, the Moving Average Convergence Divergence (MACD) is turning modestly positive. However, the Relative Strength Index (RSI) near 36 stays below the neutral 50 line, hinting at lingering downside pressure rather than a decisive recovery.

On the topside, initial resistance is defined by the $4,050 region, above which, if cleared, could lift the XAU/USD pair to the $4,100 mark. Any further move up, however, might still be seen as a selling opportunity and remain capped near the 100-period SMA, at $4,231.08. Failure to challenge the said barrier should keep the near-term bias tilted to the downside.

(The technical analysis of this story was written with the help of an AI tool.)