Geopolitical tension in the Middle East remains a key driver of gold price. At the onset of the US-Iran war in late February, the precious metal rallied as investors sought safety for their resources. However, the energy shock stemming from the blockage of the all-important Strait of Hormuz has increased inflation concerns while weighing on the non-yielding bullion.
While the long-term outlook remains bullish, headlines related to the crisis in the Middle East continue to impact gold price movements. In line with these uncertainties, investors are now seeking cues from the Fed interest rate decision later on Wednesday. A hawkish tone may trigger further selling as the bears test crucial support zones. At the time of writing, gold price was in consolidation at $4,556.
Gold price consolidates ahead of Fed interest rate decision
Two months since the US and Israeli forces attacked the Islamic Republic of Iran, gold price remains under selling pressure while holding steady above the long-term 200-day EMA. Besides, while investors are concerned about the stalled US-Iran peace talks, the market sentiment has improved.
On Monday, Iran’s foreign minister, Abbas Araqchi, stated that the country is looking into Washington’s request for negotiations. In response, the fear and greed index is now on the greed end of the spectrum with a reading of 64. In comparison, the market exuded extreme fear a month ago at 14.
On the one hand, geopolitics are set to continue impacting gold price movements in the short term. However, its safe-haven appeal and investment demand continue to offer steady support to the precious metal.
In its Q1’26 report, the World Gold Council (WGC) noted that gold’s demand, including over the counter (OTC) surged by 2% YoY. More specifically, the bar and coin demand rose by 42% to become the second-best quarter on record. Besides, central bank buying was up by 3% despite the observed increase in selling activity. Gold ETF inflow also rose albeit a slower rate compared to the exceptionally strong Q1’25.
Amid the steady long-term outlook and headline-driven market in the short term, investors are now keen on the Fed interest rate decision. The market expects the US central bank to leave interest rates unchanged for the third consecutive meeting. This is in line with the prolonged energy shock and potential stagflation.
Notably, interest rates have remained above the central bank’s target of 2% for five years. What’s more, the US labor market has been weak, though not in distress.
Investors will be particularly keen on the tone in Powell’s speech and the FOMC statement. A hawkish tone may trigger further selling for the non-yielding bullion as the bears get a chance to test crucial support zones.
Gold price technical analysis
Gold price held steady above the support level of $4,555 on Wednesday as the financial markets maintain a “wait and see” mood ahead of the Fed interest rate decision. In recent weeks, uncertainties surrounding the stalled US-Iran peace talks have placed the bullion within a trading range.
While the long-term outlook remains steady, heightened stagflation risks continue to weigh on the non-yielding asset. Subsequently, gold price is trading below the 25 and 50-day EMAs. An RSI of 38 further highlights the selling pressure.
With the Fed interest rate decision in sight, the range between the 50-day EMA at $4,755 and the support level of $4,500 is worth watching. The bulls are particularly keen on defending that support level as it aligns with the trendline that has shaped gold price movements in recent weeks.
A move below that technical indicator will signal further selling as the bears eye the lower support at $4,375. On the flip side, a neutral tone from Jerome Powell may trigger recovery beyond the current trade range towards the upper resistance level of $4,825.
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