Gold flat lines above $4,300 as firmer USD caps upside amid hawkish central bank bets

Gold struggled to make a move from beneath the $4,300 mark on Friday and remained confined within a tight range at the start of a new week, as traders awaited important central bank announcements. The key events include the US Federal Reserve, Bank of England, and Bank of Japan's updates on Wednesday, Thursday, and Friday, respectively.

The growing belief that central banks might adopt a more hawkish approach, due to inflation concerns triggered by higher energy prices, has continued to weigh on the non-yielding gold. In fact, crude oil prices hovered close to their highest level since May 21, driven by Middle East tensions and clashes in the Strait of Hormuz. Iran-backed Houthi fighters attacked a military base in southern Saudi Arabia, and a regional meeting between Gulf states and Iran on the Strait of Hormuz was postponed, adding geopolitical risk and supporting oil prices.

Fresh US inflation data, released last week, increased the odds of the Fed raising interest rates, with CME Group's FedWatch Tool indicating an over 85% chance of a rate hike at Wednesday's meeting. The ongoing geopolitical risks and inflation pressures have bolstered the US Dollar's strength, reaching a one-week high on Friday, indicating that the favorable scenario for gold is likely to be on the downside.

With the US Dollar strengthening, the XAU/USD pair is expected to face resistance at the 200-period Simple Moving Average near $4,383 and the 38.2% Fibonacci retracement at $4,414. A break above these levels could open the way to the 100-period SMA around $4,472 and the 23.6% retracement at $4,521, but only if there is a deeper sell-off below the $4,300 mark, which has not been given much attention yet.