Gold falls below support as Fed rate expectations weaken safe-haven demand

Gold prices have experienced a significant technical breakdown, with XAU/USD slipping below the $4,120 per ounce mark and booking a notable weekly loss. This downward movement has caught many retail traders off guard, as geopolitical escalations in the Middle East typically spark a powerful, knee-jerk rally in precious metals. Instead, gold has failed to sustain its safe-haven bid, exposing a shifting underlying dynamic where macroeconomic realities are firmly outpacing geopolitical fears. The primary culprit behind gold's underperformance is the rapid repricing of the Federal Reserve's interest rate path. The surge in crude oil prices has reignited fears of secondary inflationary waves, prompting aggressive, hawkish commentary from key central bank officials. Fed Governor Christopher Waller recently emphasized that monetary policy remains at a structural crossroads, noting that household consumption and corporate spending have remained remarkably resilient despite tariff burdens. Consequently, swap markets have rapidly adjusted, now assigning an 80% probability to an additional Fed interest rate hike this year. This hawkish shift has driven short-dated U.S. Treasury yields significantly higher, increasing the opportunity cost of holding non-yielding assets like gold and silver. Major Wall Street institutions, including Goldman Sachs, have actively trimmed their short-term gold targets, citing this unexpectedly aggressive turn in monetary policy. For the upcoming sessions, gold remains highly sensitive to U.S. CPI data and congressional testimonies. A hot inflation print will likely accelerate the current liquidation, exposing support levels down toward $4,060 and $4,000. Conversely, a soft data print is required to revive the broader bullish trend and spark a recovery toward the $4,250 resistance zone.