Gold extended its pullback early Tuesday, sliding from above the $4,100 threshold to test the $4,050 region as sellers maintained control ahead of the highly anticipated two-day United States Federal Reserve monetary policy meeting. The precious metal found itself in negative territory for the second straight session, pressured heavily by renewed strength in the US Dollar, which hovered near three-week highs.
Rate Hike Expectations and Dollar Strength
Market participants are increasingly pricing in a potential shift from the central bank, with FedWatch Tool data indicating roughly a 38 percent probability of a 25-basis-point rate hike at the upcoming July meeting. This represents a significant upward revision from the 16 percent chance recorded a week prior, while expectations for a September hike stand even higher at 81 percent. These persistent hawkish bets have overshadowed any relief brought by easing oil prices and subsiding inflation fears following a temporary pause in the US-Iran conflict, keeping front-end US Treasury yields elevated and detracting from non-yielding bullion.
Broader Market Sentiment and Technical Outlook
Adding to the safe-haven appeal of the dollar, a deepening tech and chipmaker sell-off across Asian markets severely dampened broader risk sentiment. On the daily chart, XAU/USD was spotted trading at $4,047.22, maintaining a distinctly bearish near-term bias as spot prices remained trapped below the 21-day simple moving average at $4,070.45. Furthermore, prices sit comfortably below the 50-day, 100-day, and 200-day simple moving averages clustered between roughly $4,213 and $4,493. The downward slope of these moving averages suggests that any attempted recovery rallies will likely run into stubborn selling resistance.
Momentum indicators reinforce the cautious outlook, with the 14-day Relative Strength Index printing at 44.99, comfortably beneath the neutral 50 threshold to signal subdued upside momentum. Reinforcing the bearish thesis, the 100-day simple moving average crossed below the 200-day simple moving average on July 22, completing a technical death cross. With the Federal Reserve policy announcement scheduled for Wednesday, traders are largely opting to sidestep fresh directional commitments, leaving bullion vulnerable to further near-term weakness as long as greenback momentum remains intact.
