Gold falls to YTD low as higher-for-longer interest rate outlook weighs

Gold (XAU/USD) slides to a six-month low on Thursday, wiping out all the gains recorded this year as a combination of hawkish central bank expectations and technical selling keeps buyers on the sidelines.

At the time of writing, XAU/USD trades flat around $4,060 after hitting $4,023 earlier in the day, its lowest level since November 2025.

Higher interest rates overshadow Gold's safe-haven appeal

The US-Iran war has put Gold's traditional safe-haven status to the test, with the US Dollar (USD) emerging as the market's preferred defensive asset. While tensions in the Middle East continue to escalate, the precious metal is down about 25% since the war began in late February and nearly 27% from its January record high near $5,600.

The sell-off has been driven largely by a shift in interest-rate expectations among traders. The Mideast war has pushed Oil prices higher, stoking inflation concerns and increasing pressure on major central banks, particularly the Federal Reserve (Fed), to tighten monetary policy stance or even consider raising interest rates.

US inflation has nearly doubled since the outbreak of the war, rising from 2.4% in January, before the war began, to 4.2% in May, the highest reading since April 2023.

Data released on Thursday showed the Producer Price Index (PPI) rose 6.5% YoY in May from 5.7% in April, above forecasts of 6.4%. However, core PPI eased to 4.9% from 5.4%, coming in below the 5.2% consensus.

As a result, traders are increasingly pricing in the likelihood of a Fed rate hike this year instead of at least two rate cuts that were expected at the start of 2026.

While Gold is often viewed as a hedge against inflation, higher interest rates tend to weigh on the precious metal because it offers no yield, making interest-bearing assets such as bonds more attractive.

Are bears still in control?

The technical outlook suggests bears hold the upper hand following XAU/USD's recent breakdown below the 200-day Simple Moving Average (SMA).

Renewed hostilities in the Middle East after Tehran downed a US Apache helicopter earlier this week have dimmed hopes for a near-term agreement, raising fears of prolonged disruptions through the Strait of Hormuz. With macro headwinds still intact, the path of least resistance remains to the downside.

Technical analysis: Oversold signals emerge, but the trend remains bearish

XAU/USD extends its bearish phase as spot holds well beneath the 200-day, 50-day and 100-day Simple Moving Averages (SMAs), which all cluster overhead as a broad supply zone.

The Relative Strength Index (RSI) on the daily chart sits in oversold territory near 26, while the Moving Average Convergence Divergence (MACD) remains deeply negative with the line below its signal and the histogram entrenched in the red, which together suggest strong but stretched downside momentum rather than a confirmed base.

On the topside, initial resistance emerges at the 200-day SMA around $4,446.50, with further barriers at the 50-day SMA near $4,593.71 and the 100-day SMA close to $4,774.23, levels that are likely to cap rebound attempts while the broader tone remains weak. On the downside, the psychological $4,000 level is the immediate support to watch, followed by the horizontal level at $3,900, where a break would reopen the sell-off toward lower cycle lows.

(The technical analysis of this story was written with the help of an AI tool.)