Dollar Dominates as Gold Battles Rising Yields and Geopolitical Risks

Key Takeaways:

*US Dollar remains supported by resilient economic data and expectations that the Federal Reserve will keep interest rates higher for longer.

*Gold stays under pressure despite safe-haven demand as elevated yields and Dollar strength outweigh geopolitical support.

*Stronger US GDP growth and lower jobless claims reinforce confidence in the resilience of the US economy.

Market Summary:

The US Dollar and gold continue to be driven primarily by expectations that the Federal Reserve will keep interest rates higher for longer. Although May’s PCE inflation data largely matched expectations, inflation remains well above the Fed’s 2% target, reinforcing market expectations for additional rate hikes this year. While the in-line inflation reading briefly eased Treasury yields and triggered some profit-taking in the Dollar, the broader outlook remains supportive for the greenback and challenging for non-yielding assets such as gold.

Federal Reserve officials reinforced this hawkish stance. John Williams said inflation is expected to moderate only gradually and delayed his projection for achieving the Fed’s 2% target until 2028, while Austan Goolsbee acknowledged some improvement in services inflation but stressed that underlying price pressures remain too high. Supporting this view, recent US economic data remained resilient, with first-quarter GDP revised higher to an annualized 2.1%, initial jobless claims unexpectedly falling to 215,000, and consumer spending remaining relatively firm. Together, these data suggest the economy is strong enough to withstand restrictive monetary policy, supporting the Dollar while limiting gold’s upside.

Geopolitical tensions have provided only temporary support for gold. Iran’s reported attack on a cargo vessel near the Strait of Hormuz and uncertainty surrounding future shipping arrangements briefly revived safe-haven demand. However, these concerns have been outweighed by persistent Dollar strength and elevated real Treasury yields, leaving gold under pressure despite occasional rebounds above the US$4,000 level.

Physical demand has also softened, with China’s net gold imports through Hong Kong falling around 38% month-over-month in May, pointing to weaker demand from one of the world’s largest gold consumers. While lower Treasury yields following the PCE report helped gold recover modestly, analysts continue to view recent gains as corrective rather than the start of a sustained uptrend. Unless inflation cools more rapidly or the Federal Reserve signals a less hawkish policy path, the Dollar is likely to remain well supported while gold continues to face downside pressure despite intermittent geopolitical support.

Technical Analysis 

DXY, H4: 

The U.S. Dollar Index (DXY) remains firmly constructive after extending its recent breakout above the 101.00 resistance level and advancing toward the key resistance zone at 101.85. The breakout confirms the continuation of the prevailing uptrend, with price maintaining a clear sequence of higher highs and higher lows while remaining supported by the ascending trendline that has guided the recovery throughout June.

The successful move above 101.00 suggests that buying momentum remains intact, while the ability to hold above this former resistance reinforces the strength of the current bullish structure. Price is now consolidating just beneath the 101.85 resistance level, making this area the next key hurdle for buyers. A decisive breakout above this barrier could pave the way for a further advance toward the psychological 102.00 region and beyond.

Momentum indicators remain supportive of the constructive outlook despite showing signs of moderating after the recent rally. The Relative Strength Index (RSI) has eased back to around the 63 level after previously entering overbought territory, indicating that bullish momentum remains healthy while allowing conditions to normalize. Meanwhile, the Moving Average Convergence Divergence (MACD) remains above the zero line, confirming that the broader trend continues to favor the upside, although the recent bearish crossover and weakening histogram suggest upside momentum has softened in the near term.

Resistance Levels: 101.85, 102.50

Support Levels: 101.00, 100.10

GOLD, H4: 

Gold remains under bearish pressure after failing to sustain its recovery above the 4,375 resistance zone and resuming its decline toward the 3,935 support level. The rejection from the former supply area reinforced the prevailing downtrend, while the subsequent formation of a bearish ABC correction accelerated selling momentum and pushed prices back below the key 4,100 support level.

The failure to break above the 4,375 resistance zone suggests that sellers continue to dominate the broader market structure, with previous recovery attempts repeatedly attracting renewed selling interest. The decisive move below 4,100 further confirms the continuation of the bearish trend, while the recent stabilization above 3,935 is currently providing temporary support. Nevertheless, as long as price remains below the former resistance area, the broader downside bias remains intact.

Momentum indicators continue to support the negative outlook. The Relative Strength Index (RSI) has rebounded modestly from near-oversold conditions but remains below the neutral 50 level, reflecting that buying momentum remains limited despite the recent stabilization. Meanwhile, the Moving Average Convergence Divergence (MACD) remains firmly in negative territory. Although the histogram has begun to recover and bearish momentum is easing slightly, both MACD lines continue to trade below the zero line, indicating that the broader trend remains skewed to the downside.

Resistance Levels: 4100.00, 4220.00

Support Levels: 3935.00, 3780.00