Gold prices modestly climbed on Thursday, reaching $3,373—up 0.13%—as escalating rumors of potential US military involvement in the Israel-Iran conflict boosted demand for the safe-haven metal. However, gains remain capped by a cautiously hawkish Federal Reserve, reflecting a complex interplay of geopolitical risk and monetary policy.
Geopolitical Concerns Propel Gold
Several US news outlets, including The Wall Street Journal and CBS News, reported that President Donald Trump has approved plans for a possible strike on Iran’s nuclear facilities while exploring diplomatic alternatives. This heightened uncertainty in the Middle East has kept investors drawn to gold amid fears of broader conflict escalation.
US equity futures declined and the US dollar maintained strength despite subdued trading volumes due to markets being closed for the Juneteenth holiday.
Fed Maintains Rates but Signals Slight Hawkishness
On Wednesday, the Federal Reserve held interest rates steady at 4.25%–4.50%, while updating its economic projections. Officials now anticipate just one rate cut in 2024, down from two previously expected, signaling a slightly more hawkish outlook driven by persistent inflation pressures above the 2% target.
Fed Chair Jerome Powell described monetary policy as “moderately restrictive” but appropriately positioned. He noted that the economic impact of tariffs has yet to fully materialize and emphasized that higher tariffs generally translate to increased costs for manufacturers, intermediaries, or consumers.
This cautious stance has limited gold’s upside, as the Fed’s tilt toward tighter policy supports the US dollar and encourages investors to consider other currencies alongside gold.
Upcoming Economic Data
Traders are set to focus on the Philadelphia Fed Manufacturing Index for June later this week, with expectations for a slight improvement from -4 to -1, potentially influencing market sentiment.
Market Highlights
The Fed’s Summary of Economic Projections downgraded 2025 GDP growth to 1.4% (from 1.7%) and raised the unemployment rate forecast to 4.5% (from 4.4%). Core PCE inflation estimates were increased to 3.1% from 2.8%.
Powell maintained a cautiously neutral-hawkish tone, stressing the Fed’s readiness to respond to external shocks including tariffs and geopolitical tensions.
The US Dollar Index (DXY) edged up 0.19% to 99.03, while US 10-year Treasury yields remained steady at 4.391%.
According to the World Gold Council, most central banks surveyed anticipate increased gold demand, a factor that could support prices.
Market data shows traders pricing in approximately 46 basis points of rate easing by year-end.
Technical Analysis: Gold Faces Resistance Below $3,400
Gold is consolidating near weekly lows around $3,347 as investors hesitate to push prices above the crucial $3,400 resistance level. The Relative Strength Index (RSI) indicates weakening buyer momentum, with the metal trading sideways.
For gold to resume its upward trajectory, it must break through the $3,400 barrier. A sustained move above this level could open the way to test resistance at $3,450 and possibly the record high of $3,500.
Conversely, a drop below $3,370 may trigger a pullback toward $3,350 and the 50-day Simple Moving Average at $3,308. Further declines could bring the April 3 support level of $3,167 into play.
As geopolitical tensions and monetary policy dynamics continue to evolve, gold’s near-term path remains closely tied to developments in both arenas.
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