Gold prices extended their decline, falling 1.93% to $4,049, as a strengthening US dollar and rising Treasury yields offset safe-haven demand from escalating Middle East tensions. The yellow metal broke below key support levels, dropping more than $100 from recent highs.
Technical Breakdown
Gold broke below the prior bullish structure low at $4,084, confirming a bearish Change of Character (CHoCH). The RSI plunged from 48 to 35, and the daily MACD golden cross signal failed. Key resistance levels include $4,060-$4,080 and $4,100-$4,120, while immediate support lies at $4,020-$4,030 and the psychological $4,000 level.
Gold remains beneath the Ichimoku Cloud on the H1 timeframe, and the 100-day and 50-day EMAs are bearishly crossed, with price trading below both. The weekly RSI is at 37.5, and the daily RSI is 43.4, indicating persistent bearish momentum.
Macro Headwinds
The US Dollar Index reached a near-one-month high, and the 10-year Treasury yield hit year-to-date highs near 4.64-4.65%. CME interest rate tools indicate a 53.5% probability of a 25-basis-point rate hike in September, though conflicting estimates range up to 81%. The Federal Reserve entered its pre-meeting blackout period on July 18 until July 30, with officials signaling that a single month of declining inflation is insufficient and the option to resume rate hikes remains.
Geopolitical Tensions Provide Limited Support
Military escalation expanded to two chokepoints simultaneously: the Strait of Hormuz and the Bab el-Mandeb. CENTCOM completed its 13th consecutive night of operations against Iranian territory, destroying command centers and drone facilities. Tehran retaliated by bombarding US bases in Kuwait, Bahrain, and Jordan, while the Houthis hit two Saudi oil tankers in the Red Sea. Crude oil prices reached new highs since June 11, with Brent pushing toward $100 per barrel. However, gold's safe-haven bid failed to offset pressure from yields and the dollar.
A proposed 10-day US-Iran truce was reported, but it was reported that Tehran rejected an Omani proposal for joint regional management of the Strait of Hormuz. President Trump reported 'good talks' with Iran but warned of forceful response if talks fail.
Outlook
Gold's primary downside target is $3,970, with further support at $3,900 and $3,800. A H1 close above $4,090 would invalidate the bearish setup. The market awaits the Federal Reserve decision on July 28-29 and key US GDP and PCE data on July 30. Analysts note that gold's pattern mirrors the mid-2020 bear cycle that extended to late 2022.