Gold (XAU/USD) traded slightly lower in early Europe on Friday, but stayed above $4,500. The US dollar held near a six-week high, supported by a hawkish Federal Reserve stance and mixed signals on a possible US-Iran deal.
Markets have fully ruled out any Fed rate cut for the rest of 2026 and are pricing at least one rate rise before the end of this year. Fed minutes from the April 28–29 meeting showed officials ready to keep rates high or raise them if inflation stays above the 2% target.
Fed Policy And Gold Direction
The CME Group FedWatch Tool shows a more than 60% chance of a 25 bps rise in December. Higher Treasury yields have backed the dollar and weighed on non-yielding gold.
An Iranian source said no deal has been reached, though gaps have narrowed, with uranium enrichment and control of the Strait of Hormuz still disputed. Marco Rubio and Donald Trump said the US opposes tolls in the Strait, and Trump added the US military would retrieve Iran’s highly enriched uranium.
Technically, gold remained in a descending channel and below the 200-period EMA on the 4-hour chart, with resistance near $4,657.44. MACD turned positive and RSI sat near 45, while support levels were cited at $4,480 and $4,362.54.
Based on the current outlook for May 22, 2026, we see a bearish sentiment for gold continuing in the weeks ahead, driven primarily by a strong US Dollar. The market has fully digested the Federal Reserve’s hawkish stance, now expecting a rate hike by year-end rather than a cut. This shift is fueling higher Treasury yields, making non-yielding gold less attractive for traders.
These rate hike expectations are supported by recent economic data, with the last Consumer Price Index report showing inflation holding at a sticky 3.4%. We have also seen crude oil prices remaining firm near $80 a barrel, which continues to stoke fears of consumer inflation. This environment is very similar to what we observed leading into the aggressive rate-hiking cycle of 2023, suggesting the Fed will not pivot anytime soon.
Derivative Positioning And Key Levels
While the geopolitical friction with Iran over the Strait of Hormuz creates uncertainty, it is currently benefiting the US Dollar’s safe-haven status more than gold. We remember how quickly tensions escalated in this exact region back in 2019, and the market is now treating the dollar as the primary hedge against this risk. This dynamic further suggests that the path of least resistance for gold is to the downside.
For derivative traders, this points toward establishing bearish positions, particularly if gold breaks below the $4,480 support level. A breach of this mark could be a key trigger for buying put options or initiating new short futures contracts. The next major downside target would then be the lower boundary of the descending channel, located around $4,362.
On the other hand, we should be cautious about any rallies, as they are likely to be short-lived. The heavy resistance zone around $4,657 presents an opportunity to sell call option spreads, taking advantage of capped upside potential. Until gold can decisively reclaim that level, any bounce should be seen as a selling opportunity rather than a reversal.
