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Gold (XAUUSD) faces pressure from a hawkish Federal Reserve and a strengthening US Dollar. The Fed’s firm stance on interest rates has reduced the appeal of non-yielding assets like gold. At the same time, global tensions and trade policy uncertainty continue to support safe-haven demand. Investors now weigh these opposing forces as they navigate a volatile market. Gold’s price now hinges on a delicate balance between rising geopolitical tensions and tightening US monetary policy. With limited rate cuts expected and market volatility on the rise, investors remain cautious amid shifting global dynamics.
 

Gold Prices Decline as Hawkish Fed Boosts US Dollar Strength

The Federal Reserve maintained its interest rates during its latest policy meeting. However, it signalled a slower pace of rate cuts ahead. This hawkish tone boosted the US Dollar and pressured gold, which offers no yield. As the Dollar strengthens, gold becomes less attractive to investors, causing a decline in price from recent highs.

Geopolitical risks continue to support demand for gold as a haven. The ongoing Israel-Iran conflict and potential escalation in the Middle East weigh on investor sentiment. Traders remain cautious, avoiding large bearish bets on gold despite the stronger Dollar. Uncertainty surrounding US trade policy, especially Trump's proposed pharma tariffs, adds to market anxiety and lends some support to gold.

Still, macroeconomic factors currently favour the dollar. The Fed's dot plot shows limited rate cuts through 2025–2027, suggesting inflation concerns remain. Some Fed members even foresee no rate cuts this year. With US banks closed for Juneteenth and no significant data releases scheduled, gold's movement will likely depend on the strength of the dollar and broader risk sentiment.
 

Gold Technical Outlook: Bullish Momentum and Key Resistance Levels

The gold chart below shows how the monthly candles following the breakout exhibit strong bullish momentum. Each candle since mid-2023 closed near its highs, confirming sustained buying interest. The pattern also indicates multiple bullish reversal points (inverse head and shoulders), with the final breakout pushing gold into new territory.

(Click on image to enlarge)

The resistance at $2,000 served as the neckline. Once broken in late 2023, gold surged without retesting that level, highlighting a strong uptrend. Support now lies at $3,000, and a fall below this level could lead to a deeper correction, potentially reaching $2,000. However, such a move currently appears unlikely unless broader sentiment shifts.

Current price action shows gold hovering just below $3,400, slightly under the $3,500 short-term resistance. This level may act as a consolidation zone unless momentum carries it higher. If bulls regain control, a push to $4,000 is technically justified. However, traders should watch for bearish signals near $3,500, especially if there are signs of exhaustion or divergence in momentum indicators on shorter timeframes.
 

Conclusion

Gold remains at a critical juncture, shaped by conflicting forces of bullish technical trends and bearish macroeconomic pressure. The Fed's hawkish stance and a stronger dollar limit upside potential, while geopolitical risks continue to offer support. Price action near the $3,500 resistance will be key in determining the next move. A breakout could open the path to $4,000, but signs of weakness may trigger a pullback. Traders should stay alert and respond to shifts in momentum and sentiment. 

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