Gold Stalls Recovery As Fed Uncertainty Keeps Buyers Cautious

• Gold trades lower for a second straight day as the US Dollar holds firm.

• Hawkish Fed expectations and elevated US Treasury yields cap the upside in the non-yielding metal.

• Investors turn their focus to the FOMC meeting minutes due on Wednesday.

Gold (XAU/USD) stalls its recovery and trades on the back foot for a second consecutive day as a steady US Dollar (USD) and doubts over the Federal Reserve's (Fed) interest rate path keep the upside in check.

At the time of writing, XAU/USD is trading around $4,130 during the European trading session on Tuesday.

While the weaker-than-expected June US Nonfarm Payrolls (NFP) report eased near-term Fed rate hike fears and triggered a relief rally in the non-yielding metal from below the $4,000 mark last week, it did little to change the broader hawkish Fed narrative.

Fed Governor Christopher Waller said on Monday that the central bank remains committed to its 2% inflation target, calling it "a credible pledge."

According to the CME FedWatch Tool, traders are pricing in a 75% probability that the US central bank will leave borrowing costs unchanged at this month's meeting. Meanwhile, the odds of a September rate hike stand at 58%, down from 68% a week ago.

Hawkish Fed expectations, elevated US Treasury yields and lingering uncertainty over a broader US-Iran peace agreement continue to support the US Dollar (USD), limiting Gold's upside. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is trading around 100.95.

Iran's Islamic Revolutionary Guard Corps (IRGC) reportedly attacked a commercial vessel near the Strait of Hormuz on Monday. Meanwhile, Iranian Foreign Minister Abbas Araghchi said negotiations on a final agreement would not begin while threats persist, after US President Donald Trump warned that Washington would either reach a deal with Tehran or "finish the job."

Traders now turn their attention to the Federal Open Market Committee (FOMC) meeting minutes, due on Wednesday, for fresh clues on the monetary policy path in the coming months, which could influence Gold prices.

Meanwhile, the latest CFTC Commitments of Traders (COT) report showed speculative traders increased their bullish bets on Gold in the week ended June 30, with non-commercial net long positions rising to 194K contracts from 181.3K a week earlier.

Technical analysis: XAU/USD rebound loses steam below $4,200

On the daily chart, XAU/USD maintains a bearish bias as it holds below both the 200-day Simple Moving Average (SMA) at $4,489 and the 100-day SMA at $4,619.

Momentum is subdued, with the Relative Strength Index (RSI) hovering near 44, while the Average Directional Index (ADX) around 38 hints at a still-established but not explosive downtrend.

On the topside, initial resistance is seen at $4,200, ahead of the 200-day SMA at $4,489, with the longer-term bearish threshold reinforced by the 100-day SMA at $4,619.

On the downside, the first meaningful support aligns with the horizontal level at $3,950, where a break would likely extend the current corrective phase toward lower psychological floors.