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Gold prices (XAU/USD) retreated sharply from a two-week high of $4,800, reversing earlier gains amid heightened Middle East tensions and renewed speculation about U.S. interest rate hikes. The dollar index strengthened as investors sought safety in the U.S. currency, pressuring gold's appeal as an alternative asset. Analysts attribute the decline to geopolitical risks in the Middle East, which boosted the dollar, and expectations of tighter monetary policy from the Federal Reserve.
The move highlights the inverse relationship between gold and the U.S. dollar, as well as gold's sensitivity to central bank policy shifts. Traders are now closely monitoring upcoming Fed statements and Middle East developments for further clues on the dollar's trajectory. The decline also reflects reduced demand for non-yielding assets like gold amid higher real interest rate expectations.
Looking ahead, investors should watch for key support levels around $4,700 and resistance near $4,900. The Fed's next policy meeting and any escalation in Middle East tensions could drive renewed volatility. Technical indicators suggest a bearish bias in the short term, but long-term investors remain cautious about gold's role as a hedge against inflation and currency devaluation.
