Gold Price Rejected Near $3,400 Amid USD Buying, Lacks Follow-Through

• Gold prices find it challenging to build on gains from the Asian session, remaining above the $3,400 level.
• Strength in the US Dollar presents a significant obstacle for the XAU/USD exchange rate.
• Geopolitical concerns and anticipations of Federal Reserve rate reductions support the appeal of gold.

Gold prices (XAU/USD) faced downward pressure despite initially climbing above $3,400 during the Asian trading session, declining for the second consecutive day on Tuesday. The rise in the US Dollar (USD) is identified as a primary factor curbing gains for the precious metal. However, the decline is tempered by escalating geopolitical tensions in the Middle East and expectations that the Federal Reserve may further reduce interest rates in 2025.

Currently, a conflict involving aerial exchanges between Israel and Iran is intensifying, now in its fifth day, heightening the risk of a more extensive regional conflict. This situation maintains a geopolitical risk premium, which helps mitigate losses for gold, considered a safe-haven asset. Market participants are likely to await the outcomes of the Federal Open Market Committee (FOMC) meeting occurring over two days before making significant moves in the gold market.

Daily Market Overview: Gold struggles amid USD strength; potential downside cushioned

• Following an attack on Iran’s state-run television by Israel and threats from Iran of a severe missile strike, geopolitical tensions are escalating. The early departure of US President Donald Trump from the G7 Summit due to these tensions highlights the growing concerns.
• Reports of three tankers ablaze in the Gulf of Oman near the Strait of Hormuz echo the 2019 incidents attributed to Iran, further escalating Middle Eastern tensions and supporting gold prices during the Asian trading hours on Tuesday.
• The US Dollar is experiencing a slight increase due to repositioning ahead of the critical FOMC meeting starting today, which places pressure on gold prices. Although no change in interest rates is anticipated, the market will closely monitor the Fed’s policy statement and comments from Fed Chair Jerome Powell for indications of future rate adjustments.
• Despite the uptick in the USD, the anticipation of resumed rate cuts by the Fed in September limits bullish momentum. This scenario, combined with ongoing trade uncertainties and geopolitical risks, particularly the Iran-Israel conflict, continues to support gold as a safe-haven asset.

Gold prices may find support near key technical levels

Technically, gold is in a short-term uptrend within an ascending channel. Positive readings from daily oscillators suggest that buying on dips could limit downside near the $3,340-3,335 range, the lower boundary of the channel. A decisive break below this level could shift the market outlook to bearish. Conversely, the immediate resistance is at the $3,400 level, with potential to extend gains to $3,434-3,435. A move beyond the recent multi-week high of $3,451-3,452 could set the stage for gold to test the April high near the $3,500 psychological level.