Gold (XAU/USD) kicked off the new week on a weaker note, trimming some intraday losses but remaining constrained below the $4,100 mark. The precious metal is currently facing renewed downward pressure driven by a resilient US Dollar (USD) and growing expectations of further interest rate hikes by the Federal Reserve.

Geopolitics Fuel Inflation Fears

The primary catalyst shaping the current market dynamic is the escalating conflict between the US and Iran. Over the weekend, military strikes and the announced closure of the critical Strait of Hormuz by Iran’s Islamic Revolutionary Guard Corps (IRGC) injected a fresh layer of uncertainty into global energy markets.

This geopolitical turmoil has triggered a surge in crude oil prices, which in turn has revived fears of energy-driven inflation. Consequently, markets are betting heavily on a hawkish response from the US central bank. Traders are now pricing in a nearly 90% probability of a Fed rate hike by the end of the year, a scenario that supports elevated US Treasury yields and undermines the appeal of non-yielding assets like gold.

Key Events to Watch

With the US Dollar bulls hesitant to commit fully without more definitive cues, the market's focus shifts to crucial macroeconomic events later this week:

  • Fed Chair Kevin Warsh's Testimony: Investors will closely monitor his congressional testimony for clearer signals regarding the central bank's future policy path.

  • US Inflation Data: The release of the US Consumer Price Index (CPI) on Tuesday and the Producer Price Index (PPI) on Wednesday will be critical in dictating near-term USD momentum and providing fresh direction for gold.

Technical Outlook

From a technical standpoint, gold maintains a bearish bias, trading within a downward-sloping channel and well below its 200-day Simple Moving Average (SMA).

  • Support Levels: The first notable psychological support sits at $4,000, with a deeper floor at the year-to-date low around $3,942. A break below this could expose further downsides toward $3,782.83.

  • Resistance Levels: Any upside attempts will face immediate resistance near the top of the channel at $4,291.51. A true bullish reversal would require reclaiming the formidable 200-day SMA, currently positioned at roughly $4,494.65.

Ultimately, the fundamental backdrop heavily favors the XAU/USD bears, suggesting that any short-term rallies in gold prices are likely to face strong selling pressure.