Gold holds firm as Fed rate outlook, Middle East developments remain in focus

Gold (XAU/USD) steadies on Monday amid ongoing focus on the Federal Reserve’s interest-rate outlook and Middle East developments. At the time of writing, the precious metal traded near $4,333, unchanged for the day. Last week, XAU/USD surged over 7% after peaking since June 17, buoyed by a shift in Fed rate expectations following weaker-than-anticipated US Nonfarm Payrolls data.

Inflation concerns eased as Iran and Oman reportedly negotiated to reopen the Strait of Hormuz, driving oil prices lower and weighing on the US Dollar and US Treasury yields. However, oil prices remain well above pre-war levels, sustaining inflation worries. The US Dollar Index (DXY) attempts a two-month low at 99.71, up 0.11% on the day, while the 10-year US Treasury yield hovers around 4.65%.

Markets now anticipate a 44% chance of a rate hike at September's meeting, down from 67% a week prior. Analysts at Brown Brothers Harriman suggest that the outlook for the US Dollar is clouded by inflation data on Wednesday and Producer Price Index data on Thursday. Meanwhile, Gold maintains a bullish stance as it stays above the 50-day SMA near $4,150 and below the 100-day SMA around $4,389.

The RSI suggests firm but not overextended upside momentum, while the ADX hints at a strengthening trend. Immediate resistance is at the 100-day SMA at $4,389, with a subsequent barrier near $4,500. On the downside, support is seen at the 50-day SMA around $4,150, followed by a key support level at $4,000, where a break could signal a deeper correction.