Gold Finds Its Footing Amid Fed Signals and Geopolitical Crosswinds

Gold prices inched higher on Wednesday, snapping a multi-session slide and rebounding from a two-week low, as investors weighed the durability of the Iran-Israel ceasefire and parsed cautious but potentially dovish comments from U.S. Federal Reserve Chair Jerome Powell.

The yellow metal, often seen as a barometer of both macroeconomic uncertainty and geopolitical stress, has remained sensitive to developments on two key fronts: global interest rate expectations and the simmering risk landscape in the Middle East and Eastern Europe. Wednesday’s modest uptick was driven by a subtle recalibration of both.

Powell’s Balancing Act

In remarks closely watched by markets, Fed Chair Jerome Powell maintained a cautious tone, signalling that the central bank remains in no rush to cut rates despite moderating inflation indicators. However, his acknowledgment that “inflation is moving gradually in the right direction” and that further progress could justify easing sooner than previously anticipated introduced a dovish tilt to the Fed’s message.

Markets are now pricing in as many as three rate cuts before the end of the year, a view that contrasts somewhat with the Fed’s official “higher-for-longer” posture. If realized, this trajectory could weigh on the U.S. dollar and Treasury yields—developments that typically enhance the appeal of non-yielding assets such as gold.

The U.S. dollar has already shown signs of softening amid expectations of a policy pivot, offering immediate support to bullion. A weaker dollar makes gold cheaper for holders of other currencies and generally correlates with higher demand in global markets.

Geopolitics and Safe-Haven Flows

Beyond monetary policy, gold’s safe-haven status continues to be reinforced by persistent geopolitical flashpoints. While a fragile ceasefire between Iran and Israel remains in place, many analysts note that the truce has done little to dismantle Iran’s nuclear infrastructure. As such, the possibility of renewed conflict remains a credible tail risk.

In parallel, continued instability in Eastern Europe—particularly around Ukraine and NATO’s posture in the region—adds another layer of complexity. For investors looking to hedge against geopolitical disruption, gold remains an attractive store of value.

That view is being borne out in fund flows. Gold-backed exchange-traded funds (ETFs) saw net inflows of 15.8 tonnes in the week ending June 20, marking the fifth consecutive week of positive flows. This reversal in sentiment comes after a sluggish first quarter and suggests growing institutional interest in defensive assets.

What’s Next?

The market’s next cues will likely come from further Fed commentary and macro data releases, particularly around inflation and labour markets. Powell is expected to speak again later this week, and investors will be listening closely for any further shift in tone that could hint at the timing and scale of potential rate cuts.

For now, gold appears to be consolidating, supported by a complex blend of monetary policy speculation and risk aversion. While upside may be capped in the short term by residual dollar strength and the possibility of strong U.S. data, the metal’s fundamental backdrop is increasingly constructive.

With ETF inflows strengthening and central banks—including those in China and Turkey—continuing to accumulate gold reserves, the broader momentum seems to favour a gradual uptrend. Should geopolitical tensions flare once again or the Fed signal more decisively toward easing, gold may well reclaim recent highs and move into new territory.

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