Gold bulls are treading carefully right now. Fresh tension around the Strait of Hormuz has revived demand for the safe-haven US Dollar, and a firmer greenback is weighing directly on bullion. Even so, the downside stays limited, because the market has been dialing back expectations of a Federal Reserve rate hike and central banks keep buying gold hand over fist. The technical picture reinforces the point, suggesting a wall of dip-buyers waits below every slip in price.
Live figures show gold changing hands near $4,163, which is 1.21% above the previous close of $4,113. In other words, even with downward pressure on the tape, the metal is holding in the green versus the prior session. The 52-week range runs from $3,264 to $5,586, and this session's volume has run about 15.89 times the 20-day average, a sign of unusually heavy churn.
Hormuz tension and the dollar's comeback
The interim agreement between the US and Iran remains fragile, and tensions around the Strait of Hormuz look to be rising rather than easing as Iran seeks to tighten its grip on the strategic waterway. In that vein, Iran's ambassador to China said on Saturday that Tehran plans to introduce new service fees for ships passing through the strategically important channel. The US, for its part, has flatly rejected the idea of Iran charging vessels for using the strait.
That standoff keeps a geopolitical risk premium alive. At the start of a new trading week, that same risk has handed the dollar renewed traction, and when the dollar climbs, gold, which is priced in dollars, tends to slip. That is why bullion eased on Monday from a two-week high. The price had briefly pushed above $4,200 earlier in the day before showing some resilience below the $4,150 mark. Still, its bias remains negative, and a three-day winning streak has now been snapped.
Fading Fed bets keep the losses in check
The single biggest reason the dollar's strength cannot run away is that the market is now trimming its bets on a Federal Reserve rate hike. When the odds of higher rates fade, the greenback gets less support, and that works directly in gold's favor. It is precisely this backdrop that pulls buyers back in on dips and prevents the price from falling too far below.
Central banks keep stacking the metal
The underlying demand story for gold looks robust. A World Gold Council survey highlighted last week that central banks around the world are increasingly turning to gold as protection against financial crises, inflation, and geopolitical risks. Almost 90% of respondents expect global central banks' gold reserves to keep growing over the next year.
On top of that, the latest reserve report from the European Central Bank (ECB) revealed a milestone: gold has now officially overtaken US Treasuries in global reserve allocations. Put simply, many nations are now placing more faith in bullion than in American bonds. In the same vein, the People's Bank of China (PBoC) added another 320,000 ounces of gold in May, marking the 19th straight month of increases in its gold reserves. That kind of steady accumulation shows that big buyers are still stacking the metal even at current prices.
The technical map: where support and resistance sit
Technically, weakness below the 23.6% Fibonacci level around $4,164 is likely to find support near the 100-period SMA. That level should act as a floor around $4,147. A convincing break below it would expose the structural low region at $3,940.
On the way up, initial resistance sits at the 38.2% retracement near $4,302. Above that lie the 50% retracement at about $4,415 and the 61.8% Fibonacci near $4,527. Higher still, the 78.6% Fibonacci at $4,686 defines the broader bullish extension zone ahead of $4,889, the April swing high.
Live indicators paint a mixed picture too. The 14-day RSI reads 45, a neutral zone that is neither overbought nor oversold. The MACD sits at -101.92 against a signal line of -112.27, leaving a histogram of 10.35 that tilts mildly bullish. Among moving averages, the EMA20 is near $4,186 and the EMA50 near $4,365, while the longer-term trend still leans soft. For intraday work, the pivot lies at $4,171, with resistance at $4,207 and $4,252 above, and support at $4,126 and $4,089 below. (The technical analysis of this story was prepared with the help of an AI tool.)
How interest rates move gold
Interest rates sit at the root of this entire gold-and-dollar story, so the mechanics are worth spelling out. Financial institutions charge borrowers interest on loans and pay interest to savers and depositors. Those rates are shaped by base lending rates, which central banks raise or cut in response to the state of the economy. Most central banks are mandated to ensure price stability, which usually means targeting a core inflation rate of around 2%.
If inflation falls below that target, a central bank may cut its base lending rate to encourage lending and give the economy a lift. If inflation climbs well above 2%, the central bank normally raises rates to try to bring it back down. Higher interest rates generally strengthen a country's currency, because they make it a more attractive place for global investors to park their money.
Higher rates, on the other hand, tend to weigh on gold. The reason is that holding gold earns no interest, whereas the same cash could sit in an interest-bearing asset or a bank instead, so the opportunity cost rises. High rates usually push the US Dollar up, and because gold is priced in dollars, that drags bullion lower. The Fed funds rate is the overnight rate at which US banks lend to one another. The Federal Reserve sets it as a range at its FOMC meetings, for example 4.75% to 5.00%, and it is the upper limit, 5.00% in that case, that is usually quoted. Market expectations for where that rate is heading are tracked by the CME FedWatch tool, and those expectations shape how markets behave ahead of the Fed's next move.
Ripples across other markets
The shadow of Hormuz tension and a firmer dollar showed up across other markets too. The British Pound ticked lower against the dollar on Monday as it tried to close out a seven-day rally. The GBP/USD pair was trading near 1.3340 at the time of writing, down from last week's 1.3387 high, though its near-term trend stays bullish. Likewise, the EUR/USD pair drifted marginally lower toward 1.1400 in Monday's European session, as the dollar found its feet after a negative weekly close. Middle East concerns and a rally in USD/JPY are lending the greenback support.
In crypto, Dogecoin (DOGE) edged toward $0.0770 and stayed hemmed into a range for the past three days following Friday's 4% rebound. Retail interest in the first-ever meme coin appears to be waning, with DOGE derivatives volume dropping, while on-chain data shows early signs that large-wallet holders, often called whales, are expanding their positions. Meanwhile, markets that came to Sintra hunting for clues about the Fed's next move largely left with confirmation that Fed Chair Kevin Warsh intends to make those clues much harder to find.
