Gold prices are experiencing renewed selling pressure and are currently just below $3,350. The strong stance of the US Federal Reserve is boosting the US Dollar, which in turn affects the demand for gold. Positive trends in European equity markets are also impacting gold prices. However, ongoing geopolitical tensions in the Middle East and trade uncertainties could help limit losses for the XAU/USD pair, which is expected to decline this week.

Fed Interest Rate Projections

The Fed decided to keep interest rates steady due to concerns about tariffs affecting consumer prices. Future projections include two rate cuts by 2025, and one cut each in 2026 and 2027, with inflation risks remaining a concern. The overall risk sentiment is shaky because of geopolitical tensions and trade uncertainties. Tariffs in the pharmaceutical sector could affect the markets and potentially support gold as a safe-haven investment. Geopolitical issues, especially tensions between Iran and Israel, are heightening regional conflict risks. The recent decline of the US Dollar may lend some support to gold, highlighting the possibility for dip-buying. From a technical perspective, gold prices are impacted by moving averages and critical support levels, leaving room for potential decline. Resistance levels around $3,374-$3,375 and $3,400 could pose obstacles to any recovery. Currently, gold is experiencing a new wave of downward momentum, now trading just below $3,350 per ounce. The main factor behind this drop is the Federal Reserve’s assertive tone, which has stabilized the US Dollar. When the Dollar rises, especially with firm monetary policy in place, gold typically falls, as the cost of holding non-yielding assets increases.

European Market Sentiment

In contrast, European stock markets are showing a more positive outlook. This “risk-on” sentiment usually leads investors to move funds away from safe havens, as seen in this week’s equity trends. While this may appear negative for gold, there are deeper issues worth paying attention to. The geopolitical landscape remains tense, especially with ongoing issues in the Middle East involving Iran and Israel. The risk of escalation is still present, and while markets haven’t fully accounted for this, any new developments could quickly shift sentiment. Additionally, uncertainties about trade, particularly tariffs on the pharmaceutical sector, add unpredictability. These risks are not just headlines; they directly affect inflation expectations and may influence investors’ hedging strategies. Chair Powell’s team opted to leave policies unchanged, but their economic projections hint at future developments. They expect a couple of rate cuts by 2025, followed by one cut each in 2026 and 2027. Inflation continues to be a concern, even as growth slows, which impacts not only gold but all interest-sensitive assets. A key point is that the Dollar, after reaching recent highs, has started to ease. This shift is significant for those monitoring market correlations. A weaker Dollar usually reduces pressure on metal prices, encouraging dip buyers to return. However, these buyers are often selective, stepping in near established technical zones. On the charts, gold is trading below its 50-day moving average, a common gauge for medium-term trends. The outlook for further weakness remains unless gold breaks through resistance at around $3,374 and then again around $3,400. Currently, we’re in a range that might prompt profit-taking among short sellers or gradual buying from those looking for a long-term hedge against inflation. We’re also keeping an eye on support around $3,325. If this level is breached, it could lead to more significant pullbacks. However, without new catalysts, any declines might be slow. Be alert for sudden spikes in geopolitical news, as these often trigger algorithmic buying in gold, especially when paired with a weaker Dollar. For those trading derivatives related to this market, the short-term setup favors tactical trading within ranges rather than chasing trends. Timing is especially important right now, given the delicate balance between policy expectations and real-world risk events. Create your live VT Markets account and start trading now.

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