Gold prices ease as safe-haven demand for the US Dollar strengthens amid geopolitical uncertainty before the FOMC decision.

Gold (XAU/USD) falls below the $4,050 mark during Tuesday’s Asian trading session, erasing the bullish gap formed at the start of the week. Ongoing geopolitical tensions continue to support demand for the US Dollar, creating headwinds for the precious metal. However, further losses may be limited as traders remain cautious and refrain from taking aggressive USD positions ahead of the highly anticipated FOMC policy decision.

Gold (XAU/USD) extends its decline after failing to sustain momentum above the $4,100 level in the previous session, slipping below $4,050 during Tuesday’s Asian trading hours. Despite the weakness, further downside may be restrained as US Dollar buyers remain cautious ahead of the Federal Reserve’s closely watched two-day FOMC meeting. Investors are looking for fresh guidance on the Fed’s future policy direction, which is expected to influence USD demand and determine the next major move for the non-yielding precious metal.

Ahead of the Fed decision, markets scaled back expectations of further rate hikes as renewed diplomatic efforts between the United States and Iran raised hopes of ending a conflict that has lasted for five months. The optimism contributed to a sharp decline in oil prices overnight and helped ease inflation concerns. The US recently suspended its military strikes on Iran after nearly two weeks of attacks, while President Donald Trump stated on Monday that discussions with Tehran were progressing positively and that a potential resolution remained possible. These developments fueled expectations that both sides could return to negotiations, potentially restoring stability to Middle Eastern energy supplies.

Nevertheless, geopolitical risks remain elevated. Trump cautioned that military action could resume if diplomatic efforts fail. At the same time, reports of drone attacks in Saudi Arabia, Jordan, and Iraq tempered market optimism. Concerns over global energy supply disruptions continue to support both crude oil prices and the safe-haven US Dollar. Attention has also shifted to the Bab el-Mandeb Strait after Yemen’s Iran-backed Houthi forces announced a maritime blockade targeting Saudi Arabia and launched attacks on oil infrastructure along the Red Sea coast. Meanwhile, shipping activity through the Strait of Hormuz remains constrained.

Overall, the fundamental environment continues to favor the US Dollar, reinforcing the possibility of additional losses in Gold. However, traders are likely to avoid making large directional bets before Wednesday’s FOMC announcement. As a result, confirmation through sustained selling pressure and a decisive break below the key $4,000 psychological level may be needed before stronger bearish positions emerge in the XAU/USD market.

Daily chart of XAU/USD

Gold’s bearish technical outlook supports the potential for further downside; a decisive break below $4,000 remains in focus

Following its recent move below the 200-day Simple Moving Average (SMA), Gold’s sideways trading pattern since June 19 can still be viewed as a bearish consolidation. Technical indicators offer mixed signals. The Relative Strength Index (RSI) remains slightly below the neutral 50 level, hovering around 45, reflecting weak buying momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) continues to rise in positive territory, suggesting that any near-term recovery is likely corrective rather than the start of a broader uptrend, provided Gold remains below its long-term average.

Despite occasional rebounds, the precious metal remains susceptible to additional losses unless buyers successfully defend support near the psychologically important $4,000 level. On the upside, resistance is seen at the upper end of the current trading range around $4,200. A daily close above this threshold would be required to weaken the prevailing bearish outlook and pave the way for a more sustained rally toward the 200-day SMA at $4,493.65.