Gold hovers near $4,040 as Fed rate outlook tempers gains

Gold settled at $4,040 an ounce on Friday, edging higher for a second straight session but still marking its fourth consecutive weekly decline as investors scaled back expectations for additional Federal Reserve rate hikes this year【1】. The metal’s modest rise follows a US PCE inflation report that was broadly in line with forecasts, prompting a slight easing of the hawkish tone that has kept the dollar strong.

Inflation data and Fed expectations

The headline personal consumption expenditures (PCE) price index accelerated to 4.1% in May, matching most analysts’ expectations and reinforcing the Fed’s focus on bringing inflation under control【1】. In response, market participants now price in three Fed rate hikes for the year, with a 62% probability that the first increase will occur in September. New Fed Chair Kevin Warsh reiterated the central bank’s commitment to tightening policy, dampening hopes that political pressure might force an early rate cut【1】.

Gold’s price trajectory

While gold rose to $4,081.07 on June 26, up 1.34% from the previous day, it has fallen 8.41% over the past month and remains 24.87% above its level a year earlier【1】. The metal’s recent bounce from oversold conditions failed to break the $4,050 horizontal support‑turned‑resistance, and it slipped back below the $4,000 mark, keeping the short‑term outlook negative【3】. Technical indicators show the MACD turning modestly positive, but the RSI stays near 36, indicating lingering downside pressure【3】.

Market reaction

The firm dollar, bolstered by the Fed’s hawkish stance, continued to weigh on gold, contributing to the metal’s weekly decline despite the modest price uptick. Equity markets showed limited reaction, while Treasury yields edged higher as investors priced in the likelihood of further rate hikes. The combination of a strong dollar and steady inflation expectations has capped gold’s upside potential for the near term.

What to watch

• US PCE inflation releases for June and July, which could shift Fed rate‑hike expectations.
• Federal Reserve meeting minutes and the September policy decision, key for gauging the timing of the first rate increase.
• Gold’s ability to hold above the $4,050 resistance level; a break below $4,000 could signal deeper weakness.

Gold’s price stability around $4,040 reflects a market caught between modest inflation‑driven optimism and a persistent Fed‑driven dollar strength, leaving the metal’s trajectory dependent on upcoming data and policy cues.