Gold Slides Toward $4,050 as Renewed US-Iran Tensions Revive Fed Rate Hike Bets; FOMC Minutes Loom

Gold (XAU/USD) saw a sharp move lower on Wednesday, July 8, 2026, as renewed military tensions between the United States and Iran sent shockwaves through global financial markets. The precious metal retreated toward the $4,050 level, erasing most of the gains recorded in the previous week, as surging oil prices and revived Federal Reserve rate hike expectations outweighed gold's traditional safe-haven appeal.

At the time of writing, XAU/USD is trading around $4,055, down approximately 1.3% on the session, after touching an intraday low of $4,052.40 — its weakest level since July 2. The selloff comes as investors grapple with a rapidly deteriorating geopolitical landscape and its implications for monetary policy.

Trump Declares Iran Ceasefire 'Over' at NATO Summit

The catalyst for Wednesday's market volatility came from Ankara, Turkey, where President Donald Trump was attending the annual NATO leaders' summit. Asked about the status of the US-Iran ceasefire agreement, Trump delivered a blunt assessment: "For me, I think it's over".

Trump did not mince words about his frustration with Tehran. "I don't want to deal with them anymore, they're scum," he told reporters. "They're sick people, they're led by sick people. They're vicious, violent people. If they had a nuclear weapon they'd use it. As far as I'm concerned, it's over". He added that negotiators from both sides "can talk" but are "wasting their time".

Trump also warned that the US could launch fresh attacks on Iran as soon as Wednesday night and potentially take over Kharg Island, the nation's primary oil export hub through which nearly 90% of Iran's crude oil exports pass. "We're going to hit them hard tonight, but we'll see how it all works out," Trump said.

However, in a confusing twist later in the day, Reuters reported that Trump did not repeat those remarks during the formal NATO leaders' meeting, citing a source familiar with the talks. Nevertheless, the damage to market sentiment had already been done.

US Launches Military Strikes on Iran After Strait of Hormuz Attacks

The president's declaration came after a dramatic escalation overnight. The United States launched a series of military strikes on Iran following attacks on three commercial oil tankers in the Strait of Hormuz — a critical waterway through which approximately 20% of the world's oil passes.

US Central Command (CENTCOM) said it fired at more than 80 Iranian targets, including over 60 Islamic Revolutionary Guard Corps small boats. The strikes targeted Iranian air defense systems, coastal surveillance installations, surface-to-air missile batteries, anti-ship cruise missiles, and drone launch sites.

Explosions were reported at Iran's main oil export hub on Kharg Island, as well as on Qeshm Island and in the southern port cities of Sirik and Bandar Abbas early on Wednesday. Iranian media reported that several people were injured in the attacks, though no fatalities have been confirmed.

In a parallel move, Washington revoked a general license that had permitted Tehran to sell crude oil and petrochemical products on international markets until August 21. A US official was quoted as saying: "As President Trump and the administration have repeatedly affirmed, the memorandum in effect with Iran is entirely performance-based. Iran will only reap benefits if they exhibit good behavior".

Iran's Ministry of Foreign Affairs strongly condemned both the military strikes and the revocation of the license, calling the US actions a "clear violation" of the Islamabad Memorandum of Understanding signed on June 18. The ministry warned that Iran "will take any measure it deems necessary" to safeguard its national interests, raising fears of further escalation.

Oil Prices Surge Above $74 as Supply Fears Intensify

The escalating conflict sent oil prices soaring. West Texas Intermediate (WTI) crude jumped 6.45% to $74.93 a barrel, while Brent crude rose 6.18% to $78.73. The surge reflected concerns over potential disruptions to energy supplies from the region.

The rebound in oil prices rekindled inflation concerns, as higher energy costs feed through to broader price pressures across the economy. Any sustained rally in energy prices will reinforce expectations that the Federal Reserve may need to keep interest rates higher for longer to combat stubborn inflation.

This dynamic is particularly problematic for gold. As a non-yielding asset, gold becomes less attractive when real yields rise. The 10-year US Treasury yield climbed to 4.58%, its highest level since late May, while the US Dollar Index (DXY) strengthened to 104.80, adding further headwinds for dollar-denominated gold.

Fed Rate Hike Bets Revive as Inflation Fears Mount

Market pricing for Federal Reserve policy shifted dramatically in response to the oil spike. According to the CME FedWatch Tool, the probability of a September 2026 rate hike surged to 68% — up from just 58% a day earlier. Traders are now pricing in a 46.2% chance of a 25-basis-point increase and a 10.8% chance of a more aggressive 50-basis-point move. The probability of no rate change has dropped to 42.9%.

Just last week, markets were pricing in a nearly 70% chance that the Fed would hold rates steady through year-end. The rapid repricing underscores how vulnerable markets are to geopolitical shocks that threaten to undo progress on inflation.

Federal Reserve officials have remained cautious in recent public appearances. New Chair Kevin Warsh, who took over in June, has emphasized the central bank's commitment to its 2% inflation target. At his confirmation hearing, Warsh stated that the Fed would "do whatever it takes" to anchor inflation expectations, signaling a hawkish bias that gold traders are now pricing in.

FOMC Minutes: What to Expect

Later on Wednesday, at 18:00 GMT, the Federal Reserve will release the minutes from the June 16-17 Federal Open Market Committee (FOMC) meeting. This was the first meeting chaired by Kevin Warsh, and the minutes will be scoured for clues about the committee's internal debates and forward guidance.

At that meeting, the FOMC unanimously decided to keep the federal funds rate unchanged at 3.50%-3.75%, but the updated Summary of Economic Projections (SEP) revealed a divided committee. While the median forecast still pointed to one rate cut by year-end, several members projected no cuts, and a few even saw the need for additional hikes if inflation proved stickier than expected.

The minutes are likely to show that the committee was already grappling with the inflationary implications of the Iran conflict, which had escalated earlier in June. With oil prices now surging even higher, the minutes could provide insight into how much weight policymakers are placing on geopolitical risks versus domestic economic data.

Traders will pay close attention to any discussion of the "higher-for-longer" narrative, as well as any explicit mention of the conditions under which the Fed might consider resuming rate hikes. If the minutes suggest that a September hike is firmly on the table, gold could test the $4,000 support level.

Technical Analysis: XAU/USD Breakdown Deepens

On the 4-hour chart, XAU/USD retains a bearish near-term tone as price holds below the 100-period Simple Moving Average (SMA) at $4,128. The yellow metal has been capped by a dense overhead structure, and momentum indicators reinforce the softer bias.

The Relative Strength Index (RSI) has slipped toward 38, indicating growing bearish momentum but not yet oversold territory. The Moving Average Convergence Divergence (MACD) has turned negative with a declining histogram, hinting at persistent downside pressure. Both indicators suggest that the path of least resistance remains to the downside.

Key Support and Resistance Levels

Immediate Support: The horizontal level at $4,000 is the first line of defence. A break below this psychological level would likely open the door to a deeper corrective slide toward the next support zone at $3,942 (61.8% Fibonacci retracement of the March-April rally) and potentially $3,886 (the 78.6% retracement level).
Short-term Support Zone: $4,041-$4,072 represents the 50% and 61.8% retracement levels of the recent upswing. Holding above this zone would keep XAU/USD in a consolidative bearish phase beneath the moving averages.
Immediate Resistance: The 100-period SMA at $4,128 is the first hurdle. Above that, the horizontal barrier at $4,158-$4,180 (the 200-period SMA on the 1-hour chart) and the 200-period SMA at $4,260 on the 4-hour chart represent stronger resistance zones. A sustained break above $4,158 would be needed to signal a potential bullish reversal.
Major Resistance Cap: The $4,400 level, which coincides with the 50% retracement of the January high to June low, remains a formidable ceiling.

Given the bearish setup, traders are eyeing the $4,000 level as the key battleground. A daily close below that could accelerate selling toward the next major support at $3,850-$3,880, where central bank buying interest is expected to emerge.

Fundamental Drivers: Central Bank Demand vs. Yield Headwinds

Despite the near-term bearish pressure, gold's longer-term outlook remains underpinned by structural demand from central banks and institutional investors. According to the World Gold Council, central banks added a record 1,136 tonnes of gold to their reserves in 2022, and the trend has continued in 2023 and 2024. In the first half of 2026, global central bank net purchases totaled approximately 480 tonnes, led by China, Turkey, and India.

This sustained buying provides a floor under gold prices and could limit deeper declines. Many central banks view gold as a hedge against currency volatility and geopolitical risk — a perspective that becomes more relevant as tensions rise.

Additionally, retail and institutional investor demand via ETFs has remained resilient, with global gold ETF holdings rising by 5% year-to-date despite the volatility. This indicates that many long-term investors see the current pullback as a buying opportunity.

However, the near-term price action remains driven by interest rate expectations. If the Fed signals a higher terminal rate or a prolonged pause, the opportunity cost of holding gold will increase, potentially triggering further outflows from gold ETFs.

Major Bank Gold Price Forecasts for 2026

Wall Street analysts remain divided on the outlook for gold, with some seeing the current weakness as a temporary correction and others warning of further downside.

Bank of America cut its 2026 average gold forecast by 14% to $4,360 per ounce, citing a more hawkish Fed than previously anticipated. However, the bank still sees $5,000 in reach once the tightening cycle ends, possibly in 2027.
Goldman Sachs maintains a more bullish view, projecting $4,900 by year-end, driven by sustained central bank demand and the potential for a weaker dollar if the US economy shows signs of slowing.
J.P. Morgan is the most optimistic, forecasting $6,000 by Q4 2026, based on a scenario of persistent geopolitical instability and a Fed pivot toward cuts in early 2027.
The World Gold Council sees gold trading in a narrow range of $4,000-$4,400 in the second half of 2026 unless a geopolitical shock triggers a rally toward $4,500-$5,000.

These divergent forecasts highlight the uncertainty surrounding gold's trajectory. For now, the market is focused on the Fed and the US dollar, but a shift in geopolitical conditions could quickly change the calculus.

What to Watch: Geopolitical and Economic Calendar

Beyond the FOMC minutes, gold traders will be monitoring several key events in the coming days:

US-Iran Military Developments: Any further strikes or retaliatory actions from Iran could trigger a flight to safety, potentially reversing gold's recent losses.
US Initial Jobless Claims (Thursday): Strong employment data would reinforce the case for a hawkish Fed, while weak data could ease rate hike fears.
US CPI Inflation Report (Friday, July 11): The June consumer price index data will be critical. If core inflation remains sticky, a September rate hike becomes almost certain, pressuring gold further.
China GDP and Trade Data: As the world's largest gold consumer, China's economic performance influences physical demand. Weak data could weigh on gold prices.

Conclusion: Gold at a Crossroads

Gold finds itself at a critical juncture. The combination of renewed US-Iran tensions, surging oil prices, and revived Fed rate hike bets has created a hostile environment for the yellow metal. Technical indicators suggest further downside is possible, with $4,000 representing a key support level.

However, gold's traditional role as a hedge against geopolitical uncertainty and inflation should not be underestimated. If the situation in the Middle East escalates further, safe-haven demand could quickly return, propelling gold back above $4,100 and potentially toward $4,200.

For now, the market is in a wait-and-see mode ahead of the FOMC minutes and upcoming economic data. Traders should remain nimble, as gold is likely to experience heightened volatility in the sessions ahead. The longer-term bull case remains intact, but the near-term path will be determined by the interplay between the Fed, oil prices, and geopolitical headlines.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Trading gold involves significant risk and may not be suitable for all investors. Always consult with a qualified financial professional before making investment decisions. The technical analysis provided in this article was generated with the assistance of an AI tool.

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