• Gold struggles to capitalize on modest Asian session gains to a three-week high.
• Iran tensions and hawkish Fed bet underpin the USD, capping the precious metal.
• Traders now look to the US inflation figures before positioning for a firm direction.

Gold (XAU/USD) retreats from a three-week high, touched during the Asian session on Tuesday, as traders await the release of the latest US consumer inflation figures before positioning for the next leg of a directional move. In the meantime, the incoming negative headlines surrounding the Middle East crisis dampen hopes for a US-Iran peace deal and benefit the US Dollar's (USD) reserve currency status. Furthermore, a diplomatic setback remains supportive of elevated Crude Oil prices, fueling inflationary concerns and bets for more hawkish central banks, including the US Federal Reserve (Fed). This contributes to a modest USD uptick and contributes to capping the non-yielding yellow metal.

In fact, US President Donald Trump dismissed Iran’s proposal to end a more than two-month-old conflict amid disagreements over Tehran's nuclear program and a standoff over the critical Strait of Hormuz. Furthermore, CNN reported that Trump has grown impatient with the continued closure of the strategic waterway and also frustrated with how the Iranians are handling negotiations to end hostilities. Adding to this, some Trump aides say that he is now more seriously considering a resumption of major combat operations than he has in recent weeks. This spark fears of a fresh escalation in the conflict and further benefits the USD, exerting some downward pressure on the Gold price.

Meanwhile, traders are still pricing in around a 25% chance that the US central bank will hike interest rates by the end of this year amid worries that the war-driven surge in energy prices will rekindle inflationary pressures. Hence, the market focus will remain glued to the crucial US Consumer Price Index (CPI), which should influence expectations about the Fed's policy path and drive the USD demand. Nevertheless, hawkish Fed expectations turn out to be another factor that lends some support to the USD and contributes to the bullion's intraday pullback from the $4,773-$4,774 region. The lack of follow-through selling, however, warrants caution before placing bearish bets on the Gold price.

XAU/USD 4-hour chart

Gold bulls have the upper hand amid constructive technical setup

From a technical perspective, the XAU/USD pair showed some resilience below the 100-period Simple Moving Average (SMA) on the 4-hour chart on Monday. The subsequent rebound from the 38.2% Fibonacci retracement level of the April-May downfall and a breakout through the 61.8% Fibo. level favors bullish traders.

Meanwhile, momentum indicators hint that upside pressure is firm but not yet in a strong trending phase. In fact, the Relative Strength Index (RSI) around 58 suggests moderate bullish momentum, while the Moving Average Convergence Divergence (MACD) histogram is hovering just below zero.

On the topside, immediate resistance is aligned at the 61.8% Fibo. retracement around $4,742, with further hurdles at the 78.6% level near $4,807 and the recent swing high at $4,890. On the downside, initial support is seen at the 50.0% retracement near $4,696, followed by the 100-period SMA around $4,671 and the 38.2% retracement at approximately $4,651. A deeper setback would expose the 23.6% retracement near $4,594 and the structural floor around $4,503.

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