• Gold rebounds after touching a fresh low since March 30 earlier this Monday.
• The USD stands firm amid geopolitical risks and might cap gains for the bullion.
• Inflation fears reaffirm Fed hike bets, warranting caution for the XAU/USD bulls.

Gold (XAU/USD) stages a modest recovery from the $4,480 region, or its lowest level since March 30, touched during the Asian session on Monday, though the upside potential seems limited. The US Dollar (USD) buying remains unabated in the wake of persistent geopolitical uncertainties. Furthermore, rising Crude Oil prices fuel inflationary concerns and bolster bets for a more hawkish US Federal Reserve (Fed), which lends additional support to the USD and contributes to keeping a lid on the non-yielding bullion.

In the latest developments surrounding the Middle East crisis, a drone strike caused a fire at the Barakah ​Nuclear Power Plant in the ​United Arab Emirates (UAE). Adding to this, Saudi Arabia said that it intercepted three drones launched from Iraq and also warned that it would take the necessary operational measures to respond to ​any attempt to violate its sovereignty and security. Furthermore, US President Donald Trump warned that Iran must get moving fast toward a deal or face severe consequences. In a post on Truth Social, Trump wrote that the “clock is ticking” and that there “won’t be anything left” if action is not taken soon, adding that “time is of the essence.”

This raises the risk of a further escalation of tensions in the Middle East and dampens hopes for a US-Iran agreement on the back of stalled peace talks, underpinning the USD's reserve currency status. Furthermore, the US blockade of Iranian ports and the effective closure of the Strait of Hormuz pushed crude oil prices to a two-week high, fueling expectations for an interest rate hike by the US central bank in 2026. According to the CME Group's FedWatch Tool, traders are currently pricing in over a 50% chance that the Fed will raise borrowing costs by the end of this year. The outlook remains supportive of elevated US Treasury bond yields, favoring the USD bulls and capping the Gold price.

The aforementioned fundamental backdrop suggests that the path of least resistance for the XAU/USD pair is to the downside. Hence, any further move up is more likely to get sold into and remain capped in the absence of any relevant market-moving macro data from the US on Monday. Moving ahead, the market focus remains glued to the FOMC Minutes on Wednesday, which will be looked for fresh clues about the central bank's policy outlook. Traders this week will also monitor the release of global flash PMIs. Moreover, the incoming geopolitical headlines might continue to inject volatility into financial markets, which, in turn, will drive the USD demand and influence the Gold price.

Meanwhile, discounts in India jumped to a record last week, while strong investment demand for physical bullion keeps Chinese premiums firm over global benchmark prices. This, however, might do little to act as a floor for Gold prices as rising Iran tensions, inflationary concerns, and hawkish Fed bets might continue to support the USD.

XAU/USD daily chart

Gold shows resilience below $4,500; not out of the woods yet amid bearish setup

Against the backdrop of last week's failure near the 100-day Simple Moving Average (SMA) hurdle, acceptance below the $4,500 psychological mark will suggest that the broader downtrend is gaining momentum. Moreover, the Relative Strength Index (RSI) is near 40, and a negative Moving Average Convergence Divergence (MACD) reading both hint at subdued buying interest. This validates the near-term bearish bias for the Gold price.

Meanwhile, immediate focus stays on the broader support area anchored by the 200-day SMA at $4,352.59, as a sustained break beneath this zone would likely expose gold to deeper corrective losses in the sessions ahead. On the topside, the 100-day SMA at $4,790.55 is the first meaningful resistance that bulls would need to reclaim to ease the current downside pressure.

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