Gold staged a mild rebound last Friday, mainly driven by temporary market expectations of US-Iran diplomatic engagement and de-escalating conflict. International oil prices retreated, concerns over rising inflation eased slightly, and the U.S. dollar weakened, allowing bulls to stage a counterattack. Spot gold briefly reclaimed the $4300.00 per ounce level during the session, yet lacked follow-up upward momentum and finally closed at $4284.65 per ounce, up 0.25%. This Monday, gold opened lower and trended down amid the Fed’s hawkish outlook and rising geopolitical tensions. U.S. President Trump rejected Iran’s proposal to reopen the Strait of Hormuz on Sunday. Earlier, Iran stated it was awaiting a clear U.S. response to its seven-day proposal for reopening the strait and other demands, and stressed it would not soften its conditions. The US-Iran standoff underpinned the safe-haven dollar and weighed on gold. Spot gold broke below the $4200.00 per ounce threshold during trading and hit a low of $4140.43 per ounce in the European session. At press time, it rebounded slightly to around $4148.55. Charts indicate gold may continue its trend in the short term

Fueled by risk aveRSIon, the U.S. Dollar Index held gains above 101.00 on Monday. According to the CME FedWatch Tool, markets now price in a 70.3% probability of a Fed rate hike in October, compared with roughly 57.6% at the start of last week. Cleveland Fed President Loretta Mester delivered a hawkish speech last Friday. She emphASIzed that the formation of inflation psychology poses the biggest risk, warning that peRSIstent high inflation may make Americans accustomed to elevated prices and raise the risk that inflation expectations become entrenched in the economy. Despite solid economic growth and labor market performance, Mester maintained that a restrictive policy stance must be kept to bring inflation down. Her remarks reinforced expectations that the dollar will remain supported by a tight policy environment.

Meanwhile, U.S. Treasury yields surged and real yields moved higher, representing the core macro factor suppressing gold prices at present. As a non-interest-bearing asset, gold becomes less attractive in a high-rate environment. On the other hand, a stronger U.S. Dollar Index makes dollar-denominated gold more expensive for holders of other currencies, reducing its investment appeal. As long as markets stick to the "higher rates for longer" narrative, every gold rebound will face profit-taking selling pressure. Markets are closely monitoring speeches from Fed officials, which together with upcoming economic data will drive movements in the dollar and gold. This week, the market will receive the U.S. PCE price index, final Q2 GDP figures, and finally the highly anticipated U.S. non-farm payrolls report. These releases will directly shape market expectations for Fed rate hikes.

Short-term gold market outlook: Spot gold faces resistance at $4350.00 per ounce, with downside support located at $4100.00 per ounce.

Spot Gold Daily Chart

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