Gold (XAU/USD) rose from a monthly low and moved back towards $4,600 in early European trading on Thursday. The US Dollar entered a bullish consolidation after reaching its highest level since 13 April, which supported gold.
The Federal Reserve kept its policy rate at 3.50%–3.75%. The decision had three dissents, the most since 1992, and Jerome Powell said the debate was about the statement’s tone, not the need to raise rates.
Fed Outlook And Inflation Risks
Traders cut expectations for Fed easing in 2026 and priced in over a 10% chance of a rate rise by year-end. Higher energy prices linked to the conflict and stalled US-Iran talks added to inflation concerns and supported the US Dollar.
Donald Trump rejected Iran’s proposal to end the two-month conflict and said there would be no deal unless Iran gives up its nuclear programme. He also said a naval blockade of Iranian ports is disrupting energy supplies through the Strait of Hormuz.
Gold ended a three-day losing run, with focus turning to the Advance Q1 GDP report and the PCE Price Index, plus Bank of England and European Central Bank updates. Technically, price action sits below the 200-period SMA, below the 38.2% retracement, with RSI near 38 and MACD negative.
Support levels are $4,494.59, then $4,401.36 and $4,268.64.
Strategy And Technical Bias
We are treating the current recovery in gold with caution, as it appears to be a temporary bounce in a bearish market. The Federal Reserve’s unexpectedly hawkish stance is the dominant factor, capping any real upward momentum for the metal. For derivative traders, this suggests that selling call options on strength or buying puts on rallies could be a prudent strategy in the coming weeks.
The Fed’s position is reinforced by stubborn inflation, with the latest Core PCE data for March 2026 coming in at 3.9%, well above the central bank’s target. The level of dissent seen at the last meeting reminds us of the early 1990s, when similar internal debates at the Fed led to prolonged dollar strength. As long as inflation remains a primary concern, rate cut expectations will stay muted, which is negative for non-yielding gold.
Geopolitical tensions are providing a floor for gold but are simultaneously boosting the US Dollar, with the Dollar Index (DXY) holding firmly above the 108.00 level. This strength acts as a direct headwind, making gold more expensive for foreign buyers and limiting its appeal. We believe any further escalation in the naval blockade of Iranian ports will likely drive the dollar higher, not gold.
From a technical standpoint, the failure to break above key moving averages suggests that sellers remain in control. We see any move toward the $4,600 mark as an opportunity to build short positions, possibly through bear call spreads to take advantage of elevated volatility. The key support levels to watch on the downside are near the $4,494 and $4,401 Fibonacci retracement zones.
Traders should remain alert for the upcoming US Q1 GDP report and updates from the Bank of England and European Central Bank. While we expect these events to introduce volatility, the fundamental backdrop of a strong dollar and a hawkish Fed is likely to remain the primary driver. A weaker-than-expected GDP print might offer a brief lift, but we would view it as a selling opportunity.
