Gold Faces Dual Headwinds, Likely to Trade Sideways in the Near Term

Summary:

Gold is being pulled in opposite directions by safe-haven demand and rising expectations for Federal Reserve rate hikes, suggesting a range-bound pattern in the short term.

BUY XAUUSD

Close Time

CLOSED

4307.85

Entry Price

4408.94

4260.70

4047.72 -23.90 -0.59%

471.5

Pips

Loss

4260.70

4260.69

Exit Price

4307.85

Entry Price

4408.94

Fundamentals

Under pressure from President Trump, Iran and Israel announced on June 8 that they would halt attacks against each other, less than 24 hours after renewed hostilities broke out. The development briefly raised hopes for easing tensions in the Middle East and reduced some safe-haven demand. However, lasting stability remains far from guaranteed.

At the same time, Israeli Prime Minister Benjamin Netanyahu declared that the wars against Iran and Hezbollah were "not over," although he claimed both adversaries had become weaker than ever. His remarks suggest that Israel has not abandoned its strategy of containing Iran and Hezbollah and could resume military operations whenever circumstances warrant.

Iran has likewise reserved the right to retaliate. This framework — a ceasefire that provides temporary breathing room while preserving both sides' right to strike again — leaves the regional situation highly fragile.

Ongoing geopolitical tensions continue to provide support for gold, but they also limit the metal's upside potential.

Meanwhile, strong U.S. labor market data are boosting inflation expectations through two channels simultaneously.

First, the continued closure of the Strait of Hormuz has kept energy prices elevated, with higher gasoline, electricity, and transportation costs gradually feeding through to consumer prices.

Second, U.S. nonfarm payrolls increased by 172,000 in May, well above expectations, indicating that the labor market remains tight and that wage pressures are unlikely to ease.

Together, these factors have intensified inflation concerns and strengthened expectations that the Federal Reserve may resume tightening.

According to CME FedWatch data, traders have raised the probability of a 25-basis-point rate hike in December to 42%, up sharply from 14% a month ago. This shift reflects a significant repricing of the Fed's policy outlook. Just a few weeks ago, markets generally expected rates to remain unchanged or even decline this year, but the stronger-than-expected employment data have altered that view.

Federal funds futures now imply nearly a 73% probability of at least one rate hike before year-end, while the probability of a single December hike has climbed to 42%.

As a result, gold is currently being influenced by two competing forces — safe-haven demand and tighter monetary policy expectations — making a short-term consolidation phase more likely.

Technical Analysis

On the 4-hour chart, gold is currently trading near the lower boundary of a descending channel. A break below this support could trigger another leg lower, with the next downside target around 4,262.92.

Conversely, if support holds, gold could stage a rebound toward 4,408.94, which coincides with the 23.6% Fibonacci retracement level. Only a sustained move above this level would signal the beginning of a more meaningful recovery, making it the key resistance level in the short term.

From an indicator perspective, the Ichimoku baseline and conversion line are moving sideways. However, the current candlestick remains above the conversion line, suggesting that gold may experience a modest pullback before resuming its upward movement.

In the ADX indicator, the ADX line is declining, indicating weakening bullish momentum. Both the +DI and -DI are trending lower, with +DI positioned below and hovering near 11.2, suggesting that gold could see a limited decline before attempting another advance. Gold Faces Dual Headwinds, Likely to Trade Sideways in the Near Term_1

Gold Faces Dual Headwinds, Likely to Trade Sideways in the Near Term_1

Gold Faces Dual Headwinds, Likely to Trade Sideways in the Near Term_2

Trading Recommendation

Direction: Long

Entry Level: 4,308.15

Target Level: 4,408.94

Stop Loss: 4,260.70

Support Levels: 4,308.15 ; 4,262.92 ; 4,166.90

Resistance Levels: 4,365.78 ; 4,408.94 ; 4,510.96

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