Gold continues to decline as Federal Reserve’s hawkish stance pressures prices

Gold Prices Continue to Slide Amid Shifting Economic Landscape

The price of gold (XAU/USD) extended its downward movement on Thursday, reaching its lowest point in over a month. Despite ongoing geopolitical unrest stemming from the US-Israel conflict with Iran, gold’s traditional role as a safe haven has been overshadowed by changing short-term macroeconomic factors.

As of the latest update, XAU/USD is trading near $4,617, marking its weakest level since February 2 and posting losses for the seventh day in a row.

Gold has faced persistent selling pressure since tensions in the Middle East intensified. The surge in oil prices has sparked renewed inflation fears, reinforcing expectations that global interest rates will remain elevated for an extended period—diminishing the attractiveness of non-interest-bearing assets like gold. This sentiment was reinforced after the Federal Reserve adopted a hawkish tone in its recent policy update, contributing to gold’s continued decline.

Federal Reserve Holds Rates Steady, Highlights Inflation Concerns

The Federal Reserve left its key interest rate unchanged at 3.50%-3.75%, as anticipated, and reiterated its commitment to a data-driven approach while acknowledging risks to both employment and price stability. The latest projections, however, indicate only one rate cut in 2026, and inflation expectations have been revised upward, with US Personal Consumption Expenditures (PCE) inflation now forecast to reach 2.7% by December 2026, up from the previous estimate of 2.4%.

The FOMC statement noted that job growth has been modest, unemployment has remained relatively stable, and inflation continues to run above target. The committee also pointed out that the economic consequences of developments in the Middle East remain uncertain.

Fed Chair Jerome Powell maintained a hawkish stance, emphasizing that persistent inflation is largely driven by higher goods prices, which have been affected by tariffs. He cautioned that rising energy costs could push inflation higher in the near term, and that inflation expectations have increased amid the ongoing Middle East conflict. While the median rate outlook was unchanged, Powell signaled a move toward fewer rate cuts and stressed the need for clear progress on inflation before considering another rate reduction.

This environment has led to higher US Treasury yields and strengthened the US Dollar (USD), as traders have scaled back their Fed rate-cut bets. Markets are no longer fully pricing in even a 25-basis-point cut by the end of the year.

Additionally, the rally in oil prices has bolstered the USD, since crude is denominated in dollars, increasing demand for the currency and putting further pressure on gold.

Escalating Middle East Tensions Target Energy Infrastructure

Geopolitical risks have intensified as Iran launched missile attacks on a facility in Qatar—one of the world’s largest LNG sites—following an Israeli strike on Iran’s South Pars gas field. Reports from Saudi Arabia, the UAE, and Kuwait also confirmed Iranian attacks on energy infrastructure in the region.

Former US President Donald Trump commented that Israel’s actions were driven by “anger” and suggested that further strikes on the South Pars gas field were unlikely. However, he warned that the US could take drastic measures, including destroying the South Pars facility, if Iran continues to target Qatar’s LNG operations.

Technical Outlook: XAU/USD Approaches 100-Day SMA as Bearish Momentum Builds

Sellers have gained the upper hand in the short term after gold prices fell decisively below the $5,000 psychological threshold and the 50-day Simple Moving Average (SMA) at $4,976, following a breakdown from a bearish flag pattern on the daily chart. This has intensified the downward trend, bringing gold closer to the 100-day SMA near $4,600.

Technical indicators continue to support a negative forecast. The Relative Strength Index (RSI) is nearing oversold levels at around 33, indicating strong selling momentum. The Moving Average Convergence Divergence (MACD) remains negative with an expanding histogram, signaling growing bearish momentum, while the Average Directional Index (ADX) at approximately 17 suggests the trend is still developing.

If gold breaks below the 100-day SMA, further declines could be triggered, with the next support levels at the February low near $4,400 and then the $4,000 psychological mark.

On the upside, immediate resistance is now found at the 50-day SMA of $4,976, followed by the $5,000-$5,100 range. A move above $5,200 would be necessary to reverse the current bearish trend.