Gold Slides to Weekly Low as Rising Oil Prices Fuel Inflation Fears

Summary:

Gold extended its decline below $4,450 as escalating Middle East tensions lifted oil prices, reinforced inflation concerns, and strengthened expectations that global interest rates will remain elevated for longer.

Sell XAUUSD

EXP

Trading

4455.00

ENTRY

4300.00

TGT

4545.00

4438.66 -50.19 -1.12%

Point

Flat

4300.00

TGT

CLOSING

4455.00

ENTRY

4545.00

Gold prices remained under pressure during Wednesday's European session, with XAU/USD dropping below $4,450 and extending losses to a fresh weekly low. The decline comes as renewed tensions in the Middle East continue to push crude oil prices higher, fueling concerns that inflation could remain elevated and forcing central banks to keep interest rates higher for longer.

Market sentiment deteriorated after the US military confirmed strikes on Iran's Qeshm Island, prompting retaliatory missile and drone attacks by Tehran against US military facilities in Kuwait and Bahrain. At the same time, fighting between Israel and Hezbollah intensified, while negotiations between Washington and Tehran remained deadlocked over Iran's nuclear program and the future of the Strait of Hormuz.

The geopolitical uncertainty has lifted oil prices for a third consecutive session, reviving inflation fears across global markets. US Secretary of State Marco Rubio also reiterated that sanctions relief for Iran would depend on Tehran relinquishing enriched uranium, highlighting the significant hurdles facing any diplomatic breakthrough.

Meanwhile, expectations for tighter US monetary policy continued to strengthen. Cleveland Fed President Beth Hammack warned that policymakers may need to act if inflation does not cool sufficiently, reinforcing the Federal Reserve's commitment to restoring price stability. According to CME FedWatch data, traders now see more than a 50% chance of a 25-basis-point Fed rate hike by year-end.

Higher Treasury yields and a stronger US Dollar have become significant headwinds for non-yielding gold. In my view, bullion remains vulnerable in the near term as investors focus on rising inflation risks and the prospect of further Fed tightening. Unless geopolitical tensions trigger a broader flight to safety or inflation begins to ease meaningfully, gold may continue to struggle beneath recent highs.

Technical Analysis

From a technical standpoint, Gold continues to trade within a firmly bearish framework on the 4-hour timeframe, with downside pressure remaining dominant following its rejection from the $4,580 resistance area. Recent price action has maintained a pattern of lower highs and lower lows, indicating that sellers still control the broader trend despite occasional recovery attempts. The latest pullback has brought XAU/USD back toward the crucial $4,450-$4,470 support zone, an area that could play a pivotal role in determining the metal's next directional move.

The $4,470-$4,480 region has now transformed into an immediate resistance barrier after several failed rebound attempts. The inability of buyers to establish a sustained foothold above this area suggests that bearish sentiment remains intact, keeping upside momentum capped. A successful break above this resistance would be required to ease near-term selling pressure and open the door for a move back toward the more significant $4,580 supply zone.

On the downside, attention remains focused on the $4,440-$4,450 support region. While this zone has managed to cushion declines in recent sessions, repeated tests have weakened its importance. A clear and sustained break below this area would likely confirm the continuation of the prevailing downtrend and expose the next major support zone around $4,300-$4,320, which aligns with the projected bearish path highlighted on the chart.

The broader market structure continues to favor sellers as long as prices remain beneath the $4,580 resistance level. The sharp rebound witnessed from late-May lows failed to generate meaningful follow-through buying, suggesting that the recovery was corrective rather than the beginning of a sustained bullish reversal. Each attempt to push higher has attracted fresh selling interest, reinforcing the bearish narrative.

Momentum conditions also appear consistent with further downside risks. The Relative Strength Index (RSI) is likely fluctuating below the midpoint threshold of 50, reflecting weak buying momentum while remaining above oversold territory. This suggests that gold still has room to extend losses before exhaustion signals emerge. Likewise, the Moving Average Convergence Divergence (MACD) is likely positioned in negative territory, with bearish momentum continuing to outweigh bullish forces.

If sellers manage to force a break below $4,440, downside momentum could accelerate toward the $4,320 area, with an eventual move to the key $4,300 support zone becoming increasingly likely. A break beneath that region would expose the $4,250 psychological level and signal a deeper deterioration in market sentiment. On the other hand, a recovery above $4,480 could trigger a corrective bounce toward $4,580, though current price action suggests such a scenario remains secondary.

Overall, the technical outlook remains tilted to the downside while Gold continues to trade below both $4,480 and the major resistance zone near $4,580. Unless buyers regain control above these levels, the path of least resistance appears to favor additional weakness in the sessions ahead.

TRADE RECOMMENDATION

SELL GOLD (XAU/USD)

ENTRY PRICE: $4,455

STOP LOSS: $4,545

TAKE PROFIT: $4,300

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

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63.37%

P/L Ratio

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Focus on

XAUUSD, EURUSD, GBPUSD

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