Gold Price Drops Below $3,325 as Middle East Tensions Ease and Risk Sentiment Improves

Gold Price Falls to $3,325 as Middle East Tensions Ease and Fed Holds Policy Steady

The Gold price (XAU/USD) dipped below $3,325 in early Asian trading on Wednesday as easing geopolitical tensions and cautious commentary from the Federal Reserve weighed on safe-haven demand.

Ceasefire in Middle East Triggers Risk-On Sentiment

Gold retreated from recent highs following the announcement of a ceasefire between Iran and Israel. After four rounds of Iranian missile strikes, both sides reportedly agreed to halt hostilities, leading to reduced geopolitical risk in global markets.

“Easing Middle East tensions is the biggest thing holding back gold. The safe-haven bid has dropped off, and the market is in more risk-on,” said Peter Grant, VP and senior metals strategist at Zaner Metals.

This shift away from fear-driven trades has softened investor interest in safe-haven assets like gold, triggering the latest pullback.

Fed Chair Powell Maintains Cautious Policy Outlook

Meanwhile, Federal Reserve Chair Jerome Powell reiterated a wait-and-see approach to monetary policy ahead of his official testimony later on Wednesday. His cautious tone contrasts with some Fed officials who suggested a possible rate cut as early as July.

For now, expectations for a September rate cut are more firmly priced in by markets, and traders await further clues from Powell's testimony for short-term direction in the gold market.

Outlook for Gold (XAU/USD)

With tensions in the Middle East easing and Fed policy outlook remaining in focus, gold may face continued downside if global risk appetite persists. However, any renewed instability or dovish pivot from the Fed could offer upside support.

Related Reading on Tredu.com:

• How Fed Policy Shifts Influence Gold Prices
• Geopolitical Risk and the Future of Safe-Haven Assets
• XAU/USD Forecast: Will Gold Recover Above $3,350?