Gold prices (XAU/USD) remained range-bound and below the $3,400 level during the first half of Tuesday’s European session as traders awaited clearer signals on the Federal Reserve’s future rate cut strategy. Market participants showed caution ahead of the Federal Open Market Committee’s (FOMC) two-day meeting starting Wednesday, which is expected to influence the trajectory of both the US Dollar (USD) and the non-yielding precious metal.
With increasing consensus that the Fed will ease borrowing costs further in 2025, the US Dollar stayed near its three-year low reached last Friday. This environment continues to support gold prices. Additionally, ongoing trade uncertainties and escalating geopolitical tensions in the Middle East have bolstered gold’s appeal as a safe haven, helping it recover from the previous day’s pullback from a near two-month high. These factors suggest limited downside momentum for gold bears in the near term.
Geopolitical Tensions Bolster Safe-Haven Demand
Heightened conflict in the Middle East is adding support to gold prices. On Monday, Israel struck Iran’s state-run television station, prompting Iran to threaten what it described as the largest and most intense missile attack in history against Israeli territory. In response to the escalating situation, US President Donald Trump left the G7 Summit early and convened the National Security Council in the Situation Room.
Further compounding tensions, three tankers caught fire in the Gulf of Oman near the strategic Strait of Hormuz, fueling fears of a repeat of the 2019 attacks attributed to Iran. These developments have reinforced gold’s safe-haven status, helping it gain ground during Tuesday’s Asian trading session.
US Dollar Moves Cautiously Ahead of FOMC
The US Dollar edged higher amid repositioning ahead of the crucial Fed policy meeting. The Federal Reserve is widely anticipated to maintain its benchmark interest rate at current levels, balancing concerns that tariffs imposed under the Trump administration may push consumer prices upward.
However, this dollar uptick lacks strong conviction as market bets increasingly favor a resumption of the Fed’s rate-cut cycle as early as September. Investors are closely watching the FOMC’s policy statement and Fed Chair Jerome Powell’s post-meeting remarks for guidance on the future path of monetary easing. These insights will be pivotal in shaping the next directional moves for both the dollar and gold.
Meanwhile, persistent trade frictions and the Iran-Israel conflict continue to support gold’s safe-haven appeal, limiting downside risks.
Technical Outlook: Gold’s Uptrend Intact
Technically, gold remains in a well-defined short-term uptrend characterized by an ascending channel. Positive momentum indicators on the daily chart suggest that dip-buying activity is likely near the $3,340 to $3,335 support zone, which corresponds to the lower boundary of the channel. A decisive break below this level could undermine the bullish case and favor bears.
On the upside, the $3,400 mark is acting as immediate resistance. A sustained move above this level could propel gold toward $3,434-$3,435. Further strength beyond the recent multi-week high near $3,451-$3,452 could open the path toward the all-time peak around $3,500 reached in April. This key resistance aligns with the upper boundary of the ascending channel, and a successful breakout could signal a continuation of gold’s rally.
Conclusion
In summary, gold prices are poised to react strongly to the outcome of the FOMC meeting amid a backdrop of geopolitical tension and trade uncertainty, with technical factors supporting limited downside and potential for further gains above $3,400.
