Gold fails at $4,700 as Fed risks support dollar

Gold touched its highest level since May 14 before stalling below $4,700, as Federal Reserve policy risks kept the dollar firm.

Gold touched its highest level since May 14 in Asian trading Tuesday before stalling below $4,700, as Federal Reserve policy risks kept the dollar firm. The initial pull in US bond yields from the Treasury Department's expanded buyback program proved short-lived, with 10-year and 30-year yields climbing back above their pre-announcement levels, according to market data.

Tamer July US inflation data shifted expectations toward a policy hold at the Sept. 15-16 FOMC meeting, though traders still price in about a 75 percent chance the Fed raises rates by year-end, according to futures pricing. The US Dollar, however, has not mirrored the yield reversal, keeping a lid on any recovery from an over three-month low and underpinning demand for the non-yielding metal.

Concerns over the US national debt, which crossed $40 trillion, have revived the so-called debasement trade and supported bullion as an alternative store of value, while escalating US-Iran tensions keep a geopolitical risk premium in play. Treasury Secretary Scott Bessent announced Monday a campaign to isolate Iran from the global economy, warning that any country doing business with Tehran risks US sanctions. Iran's Supreme National Security Council secretary, Mohsen Rezaei, responded that the Islamic Republic would halt all oil exports through the Strait of Hormuz if the economic war continues.

Resistance Stacked Above $4,680

The recent breakout through a confluence near the $4,500 psychological mark — the 200-day Simple Moving Average and the 38.2 percent Fibonacci retracement of the March-June decline — favors XAU/USD bulls, with the MACD holding positive above the zero line. The Relative Strength Index hovers in overbought territory near 71, however, and failed to help gold build on intraday gains beyond the 50 percent retracement.

Immediate resistance emerges at the 50.0 percent retracement around $4,680.86, with additional hurdles at the 61.8 percent level near $4,853.70 and the 78.6 percent retracement at about $5,099.77 ahead of the prior swing high around $5,413.22. On the downside, initial support sits at the 200-day SMA and 38.2 percent retracement confluence ahead of $4,500, while a deeper pullback would expose the 23.6 percent Fibonacci level around $4,294.

The US Personal Consumption Expenditures Price Index due Wednesday and Fed Chair Kevin Warsh's keynote address at the annual Jackson Hole Symposium on Friday are the next catalysts that will influence the dollar and provide direction for gold.

This article is for informational purposes only and does not constitute investment advice.