Gold rebounds on Fed cut bets: XAU/USD technical setup targets $4,000

Gold (XAUUSD) is gaining strength as investors respond to a weakening US Dollar and falling Treasury yields. Dovish signals from Fed Chair Jerome Powell further support this upward momentum. His comments suggest that possible rate cuts may be considered if inflation slows or the labor market weakens. At the same time, geopolitical tensions between Israel and Iran continue to fuel demand for safe havens. Despite a temporary ceasefire, both sides remain on edge, keeping market uncertainty high. Traders now await key US economic data that could further influence rate expectations and gold's upward momentum.

Gold rebounds on dovish Powell signals and declining treasury yields

Gold benefits from the declining US Dollar, attracting bullish interest. Fed Chair Jerome Powell's recent comments suggest a possible rate cut if inflation continues to drop or hiring slows. These dovish signals have pushed Treasury yields lower, reducing the appeal of the dollar. As a result, investors are turning to gold as a safe-haven asset. The decline in bond yields also minimizes the opportunity cost of holding non-yielding assets, such as gold. Traders now expect at least 50 basis points of rate cuts by year-end. This expectation continues to fuel demand for gold.

Geopolitical risks also support gold prices. Despite a ceasefire between Israel and Iran, tensions remain high. US President Donald Trump criticized both nations for violating the agreement. Media reports also revealed that recent US strikes did not entirely damage Iran's nuclear program. Both countries still claim victory and remain ready to retaliate. This uncertainty keeps safe-haven demand elevated. Investors are closely watching for any escalation that could spark another rally.

Market focus now shifts to upcoming US economic data. Thursday's GDP, Durable Goods Orders, and Jobless Claims will offer clues about the economy. However, Friday's PCE Price Index remains the key event. It will shape expectations for the Fed's next move. A weaker-than-expected inflation figure may boost the case for a July rate cut. In turn, this would further weigh on the US Dollar. Such a move could reinforce bullish momentum in the gold market.

Ascending triangle pattern indicates potential breakout in XAU/USD

The gold chart below shows an ascending triangle pattern forming since April. The price action has consistently made higher lows, indicating strong demand. However, it has struggled to break above the $3,450 resistance level, which has been tested multiple times. The triangle's top is flat, but the bottom trendline is sloping upward. This is a textbook ascending triangle, often a bullish continuation signal.

The previous leg of the rally saw a substantial 16% gain. This move led gold to test the current resistance. Price has since entered a consolidation phase, forming the triangle. Multiple attempts to break above the $3,450 zone were rejected, but each dip was met with buying interest, keeping the structure intact.

The chart suggests that a breakout above the horizontal resistance could trigger another rally of approximately 16%, similar to the previous move. If this occurs, gold could target the $4,000 level. This projection is calculated based on the height of the triangle, added to the breakout point. The pattern reflects market confidence, supported by fundamentals like falling bond yields and rising geopolitical uncertainty.

Interestingly, short-term dips formed small inverse head-and-shoulders within the triangle. This pattern adds further bullish weight to the structure. If gold breaks out, the move could be rapid, driven by technical buying and renewed investor flows.

Conclusion

Gold price is drawing strength from a weaker US Dollar and ongoing geopolitical uncertainties. The ascending triangle on the daily chart hints at an impending bullish breakout. If the $3,450 resistance is breached, a 16% surge toward $4,000 appears likely. Macroeconomic data released later this week could influence short-term sentiment. However, the broader technical structure suggests that higher prices are possible in the near term. However, a break below $3,280 will indicates further downside the next surge higher. 

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