Gold drifts lower as Fed hike bets and geopolitics lift USD ahead of Trump-Xi summit

Gold prices faltered on Monday after touching $4,400, failing to recover from a six-week low last Wednesday. Traders are monitoring developments in the Middle East crisis, which could impact inflation expectations and influence interest rate decisions. Yemen's Iran-backed Houthi forces carried out missile and drone attacks on Saudi targets in Riyadh, while Iran refused to reopen the Strait of Hormuz or resume talks with the US until Washington complies with specific demands.

President Trump expressed uncertainty over Iran's involvement in the conflict, hinting at potential significant developments. The Federal Reserve's hawkish stance and an anticipated rate hike further bolstered the US Dollar (USD), attracting dip-buyers and halting Friday's decline from the high since late May. Nordea analysts maintain a two more rate hikes forecast but caution that risks are tilted towards the upside.

US bond yields have retreated from multi-year highs, which might temper aggressive USD bets and limit further losses for gold. Crude oil prices plummeted to a one-week low due to a recovery in shipments from Saudi Arabia, easing inflation concerns and keeping the 10-year US Treasury yield below 5%. Despite a mixed fundamental backdrop, the XAU/USD pair remains below the 100-day Exponential Moving Average and the 38.2% Fibonacci retracement level, indicating a mildly bearish bias.

Resistance levels include the 100-day EMA at $4,367 and the 38.2% Fibonacci retracement at $4,406, followed by $4,515 as the next significant hurdle. Support is expected at the 50.0% retracement near $4,317, with deeper support at the 61.8% level around $4,229 and the 78.6% retracement at $4,103, with the swing low at $3,942 marking a distant floor if selling pressure intensifies.