$4,050: Gold dives to fresh two-week low as Fed rate hike bets boost US Dollar

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Gold attracts some follow-through selling as rising Fed rate hike bets continue to boost the USD.
Easing inflationary concerns fail to impress bullish traders or lend any support to the commodity.
The bearish technical setup backs the case for further losses as the focus shifts to the US PCE data.

Gold (XAU/USD) drifts lower for the second straight day – also marking the fifth day of a negative move in the previous six – and drops to a nearly two-week low during the Asian session on Wednesday. Despite easing inflationary concerns in the face of the recent fall in Crude Oil prices, traders have been pricing in a greater chance of a rate hike by the US Federal Reserve (Fed). This, in turn, pushes the US Dollar (USD) to a fresh high since May 2025 and turns out to be a key factor that continues to drive flows away from the non-yielding bullion.

Crude Oil prices have fallen significantly over the past month or so and touched a fresh low since early March this Wednesday amid the resumption of traffic through the Strait of Hormuz. In fact, an Iranian military source told Fars news agency that a limited number of vessels are being allowed to pass through the strait each day under coordination with Iran’s Revolutionary Guards Navy. Furthermore, the US Treasury Department issued a temporary 60-day sanctions waiver that authorizes the production, delivery, and sale of Iranian crude oil, petroleum, and petrochemical products. This eases global supply concerns and continues to weigh on Oil prices, helping alleviate upstream pressure on consumer inflation.

Nevertheless, investors have significantly upped their bets that the US central bank will raise borrowing costs by at least 25 basis points (bps) in 2026 following the Fed's hawkish signal last week. Nine of the Fed's 19 committee members believed that they would need to raise the policy rate to combat inflation. Adding to this, the new Fed Chair, Kevin Warsh, focused strongly on price stability during the post-meeting press conference, suggesting that the central bank might not rush to cut interest rates even in the face of declining growth. Moreover, mixed US-Iran messages on Tehran's nuclear issues act as a tailwind for the Greenback, which is seen as another factor exerting downward pressure on the Gold price.

US Vice President JD Vance said on Monday that peace talks in Switzerland had resulted in Iran agreeing to invite inspectors from the International Atomic Energy Agency (IAEA) to its nuclear facilities. Moreover, US President Donald Trump said that Iran had "fully and completely" agreed to the highest level of nuclear inspections long into the future. However, Iran's state media, citing the foreign ministry, reported that Tehran had made no new commitments on nuclear inspections. This keeps geopolitical risk premiums in play, favoring the USD bulls and backing the case for deeper losses for the Gold. Traders now look to the US Personal Consumption Expenditures (PCE) Price Index, due on Thursday, for a fresh impetus.

XAU/USD 4-hour chart

Gold bears might now aim to retest YTD low, around $4,024-$4,023

Against the backdrop of the recent repeated failures near the 100-period Simple Moving Average (SMA) on the 4-hour chart, a convincing break and acceptance below the $4,100 mark could be seen as a fresh trigger for the XAU/USD bears. Moreover, momentum indicators are weak, with the Relative Strength Index (RSI) hovering near oversold territory around 31, while the Moving Average Convergence Divergence (MACD) stays in negative territory with a declining line. This, in turn, suggests that downside risks remain dominant even if occasional short-covering bounces emerge and backs the case for a decline toward retesting the year-to-date low, around the $4,024-$4,023 area, touched earlier this month.

On the topside, the 100-period SMA at $4,287.33 is the first meaningful resistance, and a sustained recovery above this barrier would be needed to ease the prevailing bearish bias and open the door to a more constructive consolidation phase. Until then, any approach toward the $4,280-$4,290 region is likely to be treated as an opportunity to re-establish selling interest while momentum signals fail to show a durable bullish reversal.

(The technical analysis of this story was written with the help of an AI tool.)

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.