Gold price falls as markets react positively to easing tensions in the Middle East

• Gold Prices Decline as Israel-Iran Ceasefire Boosts Riskier Assets.
• Fed Chair Powell’s Testimony Indicates Slow Approach to Rate Cuts.
• XAU/USD Faces Pressure, Key Support Level at $3,300.

Gold prices experienced a downturn on Tuesday, driven by a shift from safe-haven assets, influenced by comments from Jerome Powell, Chair of the Federal Reserve (Fed).

During his semi-annual Congressional testimony, Powell emphasized the Fed’s commitment to controlling inflation, suggesting that rate cuts could be considered later in the year. However, the easing of geopolitical tensions following the Israel-Iran ceasefire has been a primary factor affecting gold prices.

As gold approaches the $3,300 mark, its sensitivity to geopolitical shifts and Fed rate expectations continues to play a significant role. Further insights from Powell are anticipated to influence market dynamics, especially with upcoming inflation data this Friday.

Daily Market Overview: Israel-Iran Ceasefire and Fed Rate Expectations Impact Gold Prices

• Risk appetite increased following the announcement by US President Donald Trump of a ceasefire between Israel and Iran, urging adherence to the peace agreement.
• Gold prices fell as market optimism grew due to the potential de-escalation of Middle East tensions.
• Despite the ceasefire, tensions flared briefly as Israeli Defense Minister Israel Katz ordered strikes in response to alleged violations by Iran, which Iran denied.
• The ceasefire, initially announced by Trump, aims to stabilize the Middle East, which is crucial for global peace.
• Following Iranian missile attacks on US bases in Qatar, which were intercepted, the ceasefire has also influenced oil prices by reducing risk premiums associated with supply disruptions.
• The easing of geopolitical risks is likely to lower inflation expectations, aligning with the Fed’s monetary policy considerations under pressure from Trump for rate reductions.
• Market expectations include potential Fed rate cuts, with analysts predicting a possible easing as early as September.
• Comments from Fed officials like Michelle Bowman and Christopher Waller have indicated openness to rate cuts, contingent on continued easing of inflation.
• The upcoming release of the Core Personal Consumption Expenditures Price Index (PCE) will be crucial in guiding the Fed’s rate decisions.

Technical Analysis: XAU/USD Nears Key $3,300 Support Level

Currently trading near $3,315, XAU/USD has slipped below the 50-day Simple Moving Average (SMA), which now poses resistance at $3,322. Additional resistance is seen near the 20-day SMA at $3,352.

Support is firming at the psychological $3,300 level, with further technical levels to watch including the 38.2% Fibonacci retracement at $3,292. A break below this could lead to the 50% retracement level at $3,228.

A potential rebound above the 50-day SMA could target the 20-day SMA and the 23.6% Fibonacci level at $3,372. A decisive move above $3,400 would be necessary to rekindle bullish momentum. The Relative Strength Index (RSI) indicates a decrease in upward pressure with a current reading of 46.