Gold retreats from mid-May highs; fails ahead of $4,700 as Fed risks support USD

Gold (XAU/USD) touched a fresh high since May 14, during the Asian session on Tuesday, though it struggled to capitalize on the move and failed to break the $4,700 mark. The initial downward push on US bond yields due to the Treasury Department's expanded buyback strategy turned out to be short-lived amid concerns over the growing US national debt, which crossed $40 trillion. This has revived what traders call the "debasement trade" and underpinned demand for bullion as an alternative store of value. Yields on long-dated US Treasuries initially fell after the US Treasury Department announced last Wednesday that it would double buyback operations for long-dated government debt from September. The relief from that intervention has since fully unwound, with 10-year and 30-year Treasury yields climbing back above their pre-announcement levels. The US Dollar (USD), however, has not mirrored the reversal amid receding bets for an immediate policy tightening by the US Federal Reserve (Fed). Tamer July US inflation data shifted market expectations toward a policy hold at the upcoming September 15–16 FOMC meeting. This keeps a lid on the attempted US Dollar (USD) recovery from an over three-month low and turns out to be another factor supporting the non-yielding Gold. Nevertheless, traders are still pricing in around a 75% chance that the US central bank will raise borrowing costs by the end of this year amid inflation risks stemming from volatile crude oil prices and escalating US-Iran tensions. In the latest developments surrounding the Middle East crisis, Treasury Secretary Scott Bessent announced Monday that the US is launching a campaign to isolate Iran from the global economy. Bessent also warned that any country conducting business with Iran risks facing US sanctions. Iran's Supreme National Security Council secretary, Mohsen Rezaei, had said that the Islamic Republic would halt all oil exports through the Strait of Hormuz and anywhere else in the Persian Gulf if economic war continues. This keeps geopolitical risk premium in play, lending some support to crude oil prices and the safe-haven Greenback. This, in turn, caps the upside for gold as traders now look forward to the release of the US Personal Consumption Expenditures (PCE) Price Index on Wednesday. Apart from this, Fed Chair Kevin Warsh’s keynote address at the annual Jackson Hole Symposium on Friday will be scrutinized for more interest rate cues, which will influence the USD and provide some meaningful impetus to the Gold price. The recent breakout through a confluence hurdle near the $4,500 psychological mark – comprising a technically significant 200-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement level of the March-June decline – favors XAU/USD bulls. Moreover, the Moving Average Convergence Divergence (MACD) stays positive above the zero line, hinting that buying pressure is still dominant even as conditions look stretched. Meanwhile, the Relative Strength Index (RSI) hovers in overbought territory near 71 and fails to assist the Gold price in building on intraday gains beyond the 50% retracement level. Nevertheless, momentum indicators remain constructive, suggesting that any corrective slide is more likely to be bought into and remain limited. Initial support is seen at the 200-day SMA and the 38.2% retracement confluence, ahead of $4,500, while a deeper pullback would expose the 23.6% Fibo. level around $4,294 as a more distant floor. On the topside, immediate resistance emerges at the 50.0% retracement around $4,680.86, with additional hurdles at the 61.8% retracement near $4,853.70 a