Gold extends slide as hawkish Fed bets and US-Iran peace doubts support USD
- Gold attracts some sellers on Thursday amid the underlying bullish sentiment surrounding the USD.
- Hawkish FOMC Minutes reaffirm rate hike bets and underpin the USD amid geopolitical uncertainties.
- The downside, however, seems cushioned amid mixed signals over a potential US-Iran peace deal.
Gold (XAU/USD) extends its steady intraday descent through the early European session, eroding a part of the previous day's modest recovery move from the vicinity of the $4,450 level, or the lowest since March 30. Hawkish FOMC Minutes released on Wednesday reaffirmed market bets for an interest rate hike by the end of this year, which keeps the US Dollar (USD) close to a six-week high and acts as a headwind for the non-yielding bullion. The downside, however, remains cushioned as traders seem hesitant and opt to wait for further developments surrounding the Middle East crisis amid mixed signals over a potential US-Iran peace deal.
Minutes from the Federal Reserve’s (Fed) April 28–29 meeting revealed that a majority of policymakers believe that policy firming would likely become appropriate if inflation continued to run persistently above the 2% target. Officials broadly agreed that inflation risks were skewed to the upside and also acknowledged that the conflict in the Middle East could materially alter the balance of risks and complicate the appropriate policy path going forward. According to the CME Group's FedWatch Tool, traders are pricing in over a 50% chance that the US central bank will raise borrowing costs by 25 basis points (bps) in 2026.
The hawkish outlook, in turn, helps limit the overnight USD corrective slide triggered by renewed hopes for a de-escalation in the Iran conflict. In fact, US President Trump said on Wednesday that the US is in the "final stages" of talks with Iran. Adding to this, US Vice President JD Vance also struck an optimistic tone and stated that Iran wanted to make a deal. This, in turn, boosted investors' confidence, which undermined the Greenback's reserve currency status and offered some support to the Gold. The optimism, however, remains capped amid Trump's warning of more military action if Iran does not agree to a peace deal.
Iran criticized Trump's threat and warned against renewed US and Israeli attacks, saying that any such move could greatly escalate the war. Furthermore, investors remain skeptical about an elusive US-Iran peace deal amid major disagreements over Tehran's nuclear program and a standoff over the critical Strait of Hormuz. In fact, Iran launched a new “Persian Gulf Strait Authority” to control traffic through the strategic waterway. This keeps geopolitical risks in play, which contributes to limiting the downside for the USD and keeping a lid on any meaningful appreciating move in the Gold price, warranting caution for bulls.
XAU/USD 4-hour chart
Gold bears look to retain intraday control amid mixed technical setup
From a technical perspective, the XAU/USD pair maintains a modest bearish bias within a downward parallel channel and remains well under the upper boundary around $4,682.12. Meanwhile, the Relative Strength Index (14) at 46.60 has recovered from oversold territory, though it still points to only neutral-to-soft momentum. However, a mildly positive turn in the Moving Average Convergence Divergence (MACD) suggests corrective upside rather than a completed bearish phase.
On the topside, initial resistance emerges at the prior channel reference around $4,632.58, with stronger supply anticipated at the upper parallel boundary near $4,682.12, which is likely to cap advances unless it decisively broken. On the downside, the immediate focus is on the $4,500 psychological mark as the nearest tactical floor. A sustained break lower would expose the lower boundary of the channel near $4,380.81, where buyers may attempt to rebuild a more durable base.
(The technical analysis of this story was written with the help of an AI tool.)
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.