Gold Price Falls Sharply as Ceasefire and Fed Pivot Shift Market Tone

Gold (XAU/USD) Falls Below $3,320 as Geopolitical Premium Evaporates and Fed Dovishness Shapes Market Direction

XAU/USD Slides Sharply Following Israel-Iran Ceasefire Agreement

The price of Gold (XAU/USD) dropped to an intraday low of $3,318.60, extending a steep decline of over 1.5% during the Tuesday European session. The catalyst: a widely publicized ceasefire between Israel and Iran, brokered by U.S. President Donald Trump after two weeks of intensifying military exchanges. The truce eliminated the geopolitical fear premium that had buoyed gold throughout June, reversing the precious metal’s recent climb toward $3,400.

Trump confirmed via Truth Social that the ceasefire is now in effect, warning both nations against violating the fragile truce. Israeli Prime Minister Netanyahu issued a similar statement, emphasizing retaliation if Iran breaches the agreement. While tensions remain unresolved beneath the surface, the market's response has been immediate: gold's safe-haven allure has diminished.

Fed Policy Turn and Bowman’s Commentary Weigh on USD, Support Rate Cut Outlook

While geopolitical headlines drove initial volatility, monetary policy sentiment has taken center stage. Federal Reserve Vice Chair Michelle Bowman publicly supported a July rate cut, citing labor market softness and minimal inflationary risk from Trump’s tariff policies. In Prague on Monday, Bowman stated, “Should inflation remain contained, I would support lowering the policy rate at our next meeting to bring it closer to neutral and preserve labor market strength.”

This dovish pivot further pressured the U.S. Dollar Index (DXY), which weakened near 98.13, intensifying gold’s volatility. While lower interest rates typically bolster non-yielding assets like gold, the ceasefire’s impact on risk sentiment ultimately overpowered the policy tailwinds. Traders are reassessing inflation dynamics and rebalancing exposure across commodities, especially with Treasury yields holding under 4.35%.

XAU/USD Technical Breakdown: Range Structure Holds Amid Selloff

Despite the sharp pullback, XAU/USD remains within a clearly defined technical range. Tuesday’s drop cut below the 20-day EMA, signaling potential for deeper consolidation. Key support sits at $3,245 (May 29 low) and $3,200, a critical round-number floor. Further downside could test the May 15 low of $3,121.

Resistance continues to form near $3,500, the top of an ascending triangle pattern that began forming from the April 7 low at $2,957. The triangle's compression signals a volatility breakout is likely imminent. However, with the 14-day RSI slipping below 50, bearish momentum now dominates the near-term trend.

Gold futures (GC=F) opened Tuesday at $3,383.80, slightly above Monday’s close at $3,377.70, before reversing hard. The decline marks a 0.4% drop week-over-week and brings the price back in line with the June 17 open at $3,398.30. Despite recent weakness, gold remains up 45.7% year-over-year from its June 2024 price of $2,323.30.

Commodity Markets Recalibrate After US Airstrikes and Iran’s Response

The Middle East conflict escalated over the weekend with U.S. B-2 bombers and submarines striking Iranian nuclear facilities at Fordo, Natanz, and Isfahan. In retaliation, Iran targeted the U.S. Al Udeid base in Qatar with missiles on Monday. However, advanced warnings limited damage and casualties. Trump used the de-escalated situation to push forward a ceasefire announcement.

Following this, both Brent Crude and gold lost ground. Brent fell 6.5% to $70.68, while silver held steady at $36.31. The easing of geopolitical risk led investors to reduce exposure to defensive commodities, prompting a synchronized pullback.

Outlook: Consolidation Persists as Market Eyes Fed Clarity and Middle East Stability

The gold market remains fundamentally bullish over the long term, but short-term price action is caught in a broad consolidation channel between $3,200 and $3,500. If the U.S. Dollar continues to weaken and Treasury yields remain subdued, the path of least resistance may still be upward. However, traders need to monitor Fed Chair Jerome Powell’s upcoming testimony and economic data such as the Consumer Confidence Index to assess near-term policy bias.

Technically, a breakout above $3,500 would unlock territory toward $3,550 and $3,600. A failure to hold $3,245 may drive a retest of $3,121 or even the 50-day EMA near $3,300, depending on macro conditions.

With current volatility compressing and traders hesitant ahead of macro catalysts, XAU/USD remains in balance, reflecting a reset in risk perception across global markets. The next decisive move will likely depend on incoming inflation prints, geopolitical news flow, and confirmation of the Fed’s dovish intentions.

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