Gold Outlook: Hawkish Fed Caps the Upside — Core PCE in Focus

Gold had a volatile week, trading higher before reversing sharply to close lower. The fading of geopolitical risk premiums offered some initial support, but the FOMC meeting delivered one of the most hawkish signals in recent memory — and with U.S.-Iran talks stalling once again, bullish momentum faded.

Heading into this week, beyond geopolitical developments, Thursday's May core PCE will be the data point most closely watched by markets — a key input for reassessing the inflation outlook, repricing the Fed's policy path, and adjusting gold exposure accordingly.

Technical Observation: Daily Chart Remains Bearish — $4,000–$4,024 Is Critical Support

On the XAUUSD daily chart, gold has repeatedly failed to break through resistance near $4,370, and last week extended its losing streak to a third consecutive weekly decline. The overall structure remains rangebound and tilted to the downside. That said, short covering and early dip-buying are beginning to lay the groundwork for a near-term technical bounce.

In the near term, the $4,000 handle through to the June 11 low at $4,024 represents the key support zone in play. A decisive break below this level would open the door toward $3,880–$3,900, and potentially deeper downside beyond that.

On the upside, a recovery and sustained close above $4,220–$4,250 would signal improving near-term momentum, with bulls then targeting resistance at $4,370 and $4,460.

Hawkish Fed Pivot: Dot Plot Points to Hikes, Non-Yielding Assets Under Pressure

Last week's FOMC meeting has been the most significant headwind for gold in recent weeks.

While the Fed held rates unchanged, the updated dot plot told a different story: nine of eighteen participants now project at least one rate hike before year-end. Compared to the March meeting, when a majority of officials still penciled in a cut this year, this represents a sharp reversal in the expected rate path.

In plain terms: the rate-cut cycle markets had been counting on has all but vanished from view, replaced by a "higher for longer" regime that continuously raises the opportunity cost of holding gold.

At the same time, the Fed revised its year-end core PCE forecast sharply higher from 2.7% to 3.6%, while cutting GDP growth projections to 2.2%. The combination of elevated inflation and slowing growth leaves policymakers with little room to pivot toward easing anytime soon.

Against this backdrop, the 10-year Treasury yield remains elevated near 4.5%, the dollar index has climbed to a 13-month high, and gold ETFs continue to see outflows. The twin pressures of a stronger dollar and rising real yields are persistently eroding gold's appeal as a non-yielding asset.

One detail worth watching: Warsh declined to submit his own dot plot projection, and has signaled a desire to reduce the Fed's reliance on forward guidance. Over the medium term, this points toward a market environment where traders shift from pricing the rate path to pricing policy uncertainty — a dynamic that could, over time, bolster gold's safe-haven appeal. For now, though, the market remains focused on rates themselves rather than any potential benefit from policy opacity.

Geopolitics: Still a Wildcard, But Losing Its Pull

The U.S.-Iran peace agreement has been signed, but execution-level uncertainty continues to linger. Yet compared to just a few weeks ago, markets have grown noticeably less responsive to geopolitical headlines — and for good reason. Regardless of whether talks progress smoothly or hit another wall, the impact on gold is increasingly being overshadowed by the rates story.

If negotiations stall, oil prices and risk aversion may tick higher briefly — but in that environment, the dollar tends to benefit more than gold. And if talks advance, any inflation relief from falling energy prices will take time to filter through to Fed policy, making a near-term pivot no more likely.

Unless there is a major deterioration — a ceasefire breakdown, a significant disruption to Strait of Hormuz shipping — geopolitical developments are more likely to generate short-term noise than sustained directional moves. The pricing power in gold markets is shifting back to rates and the dollar.

Watching Geopolitics and Core PCE

The fundamental pressure on gold remains squarely on the rates side. Elevated real yields, a resilient dollar, and rising rate-hike expectations form a triple headwind that is unlikely to ease materially in the near term. Until these dynamics shift, any bounce is more likely a technical correction than the start of a new trend — the broader tone remains rangebound.

Beyond the Middle East, Thursday's May core PCE is the week's standout release. As the Fed's preferred inflation gauge, markets are expecting a year-over-year reading of 3.4%, up from the prior print. The trimmed mean PCE — a measure Warsh has cited on multiple occasions — came in at 2.9% in April, a reminder that underlying inflation pressures have not fully abated.

If core PCE comes in hotter than expected, rate-hike pricing is likely to intensify further, supporting the dollar and Treasury yields while adding downside pressure on gold. Conversely, a meaningful cooling in the data could chip away at hawkish expectations and open a window for a tactical rebound.