Gold prices inched higher on Wednesday, supported by a weakening U.S. dollar and heightened geopolitical tensions, as investors awaited fresh guidance from the U.S. Federal Reserve. Spot gold was last seen trading around $3,386 per ounce, holding steady near recent highs amid cautious market sentiment.
The U.S. dollar index slipped 0.2%, making dollar-denominated gold more appealing to non-U.S. investors and contributing to the metal’s modest gains. However, traders largely remained on the sidelines ahead of the Fed’s policy announcement later today, which is expected to provide updated economic projections and rate guidance.
Weaker U.S. Economic Data Strengthens Rate Cut Expectations
Recent U.S. macroeconomic indicators have fueled speculation that the Fed may move toward a more dovish stance. Retail sales for May fell more than anticipated, primarily due to declining auto sales and industrial production. Coupled with soft housing market data, the figures have added pressure on the central bank to begin easing policy in the coming months.
“Gold fluctuated as investors tracked the escalation of risk in the Middle East. U.S. macro data is soft,” analysts at ANZ commented, pointing to the dual tailwinds of economic uncertainty and geopolitical unrest supporting gold.
Geopolitical Tensions in the Middle East Reinforce Safe-Haven Demand
Ongoing conflict between Iran and Israel continues to bolster gold’s appeal as a safe-haven asset. The situation entered its sixth consecutive day of missile exchanges, despite international calls for de-escalation. In a strongly worded statement, former President Trump demanded Iran’s unconditional surrender, while U.S. officials confirmed additional military deployments to the region.
The heightened risk environment has prompted increased flows into gold exchange-traded funds (ETFs). The SPDR Gold Trust (GLD), the world’s largest gold-backed ETF, reported a 0.43% increase in holdings to 945.94 tonnes on Tuesday, reflecting rising investor demand for bullion exposure.
Bullish Outlook: Goldman Sachs Sees Gold at $3,700 by Year-End
Investment bank Goldman Sachs has reiterated its bullish outlook on gold, maintaining a year-end 2025 target of $3,700, with a further rise to $4,000 by mid-2026. The firm cites continued central bank accumulation and accelerating ETF inflows as major drivers once the Fed initiates rate cuts.
“Once the rate environment pivots, we expect substantial flows into gold ETFs and physical bullion,” Goldman Sachs analysts stated. “Central bank demand remains structurally strong, and geopolitical risk adds a layer of urgency to diversify reserve assets.”
Technical Analysis: $3,397 Remains Key Resistance
From a technical standpoint, gold (XAU/USD) remains below the 50-day Exponential Moving Average (EMA) at $3,392, and has struggled to break through short-term resistance at $3,397. Multiple attempts to push higher have failed to gain momentum, with the MACD indicator showing a flat trajectory, signaling consolidation rather than a breakout.
Traders will be closely watching the $3,397 resistance level. A sustained break above this threshold could pave the way for a retest of recent highs and potentially initiate the next leg toward the $3,700 target.
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