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Gold has decreased by 0.2 percent to $4020.90 per ounce, holding its decline after a 1.1 percent drop in the previous session. Silver remained nearly unchanged, trading at $57.16, after losing over 2 percent the day before. Platinum remained stable, while palladium saw a slight increase.
The metal is in the red ahead of the delicately balanced Federal Reserve decision on rates, which is expected today amid ongoing tensions in the Middle East. Interest rate swaps are pricing in about a one-third probability of a 25 basis point hike, representing an unusually high degree of uncertainty ahead of today's meeting by recent years' standards. Higher borrowing costs are traditionally a headwind for gold, which does not yield interest.
Central bank officials appear to be torn between a softer-than-expected June inflation report and the recent rise in oil prices, which has accompanied the escalation of hostilities between the US and Iran this month.
The upcoming Fed decision is crucial for the future trajectory of gold. If the central bank provides a more hawkish-than-expected signal, strengthening the prospect of higher rates or indicating greater concern about inflation, gold is likely to come under certain pressure.
The scale of gold's decline since the start of the conflict remains significant. Since the beginning of the US-Iran war over five months ago, the metal has decreased by nearly a quarter as high energy prices fueled inflationary pressures and increased the likelihood that rates will remain high for longer. Nonetheless, since late June, the metal has held around the key support level of $4000, aided by a wave of buying on dips.
On the diplomatic front, President Trump hosted Israeli Prime Minister Benjamin Netanyahu at the White House on Tuesday, trying to lay the groundwork for further diplomacy. The market appears to be frozen in anticipation of a resolution in two directions: monetary, where the Fed's decision will determine the short-term trajectory of rates, and geopolitical, where the fragile pause in the conflict may either continue to de-escalate or lead to a new round of escalation, as today's interception of an Iranian attack has already shown.
Regarding the current technical picture for gold, buyers need to reclaim the nearest resistance at $4062. This would allow targeting $4124, above which it will be quite challenging to break. The furthest target would be in the $4186 area. If gold falls, bears will attempt to take control at $4008. If successful, breaking this range would deal a serious blow to the bulls' positions and push gold down to a low of $3954, with the prospect of sliding to $3906.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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