Gold prices (XAU/USD) edged higher during the Asian trading session on Wednesday, hovering around $4350. Following a period of consecutive declines, the precious metal has staged a technical rebound from the vicinity of last week's annual low. However, the overall trend continues to be influenced by a combination of easing global geopolitical risks and the outlook for Federal Reserve policy.
The United States and Iran are reportedly preparing to formally sign an interim peace agreement, with both sides indicating positive progress. U.S. officials have suggested the full agreement could be announced within the next two days, with a signing ceremony planned in Switzerland. Market participants view a successful implementation of the deal as a step towards normalizing shipping traffic through the Strait of Hormuz, thereby alleviating energy supply risks that have troubled global markets.
On Tuesday, U.S. President Trump stated that the Strait of Hormuz could reopen as early as Friday, emphasizing that the relevant agreements are largely complete. The Strait handles approximately 20% of the world's seaborne crude oil shipments. Its return to normal operation is expected to help ease pressure on international energy prices and reduce the risk of a renewed surge in global inflation. As the energy shock gradually subsides, market bets on further monetary tightening by the Federal Reserve have receded.
Data from the CME FedWatch Tool shows the market-implied probability of a Fed rate hike this December has fallen from nearly 70% last week to around 58%. This suggests investors believe falling energy prices may reduce the necessity for the Fed to adopt a more aggressive policy stance in the future, simultaneously weakening the support gold had received from inflation concerns.
The market widely expects the Federal Reserve to keep interest rates unchanged at its June policy meeting, with the federal funds target rate range likely remaining at 3.50% to 3.75%. However, investor focus is squarely on the content of the post-meeting press conference by Fed Chairman Kevin Wash, as the market seeks clues about the future path of interest rates. If the Fed signals a continued fight against inflation and retains the possibility of future hikes, the U.S. dollar could regain support, potentially capping gold's rebound. Conversely, if policymakers emphasize economic growth risks and adopt a more dovish policy tone, gold could attract renewed capital inflows.
Technical Analysis Overview
On the daily chart, gold found some buying support near $4300 after a rapid decline and is currently in a corrective phase following an oversold condition. However, the overall structure remains within a downtrend. In the near term, the $4350 to $4380 zone constitutes the primary resistance area. A failure to decisively break above this level could see prices retest the key psychological $4300 support. A further break below this level could open the path for a decline towards the $4250 area. If bulls manage to establish a firm footing above $4380, it would increase the likelihood of a further rebound towards the $4450 region.
Short-Term Technical Perspective
On the 4-hour chart, gold's short-term downtrend has shown signs of slowing. Prices have formed a temporary support base around $4300, with short-term moving averages gradually flattening, indicating some weakening in bearish momentum. Technical indicators suggest the market has recovered from its previous oversold state, pointing to a need for further near-term recovery. However, until a decisive break above key resistance areas is achieved, the overall view remains one of a consolidating and corrective phase. Investors should closely monitor the potential for a directional breakout stemming from the Fed's decision and the Chairman's remarks.