Gold (XAU/USD) is struggling to extend its moderate rebound after reaching its lowest level since March 30 earlier on Monday, while prices remain around the $4,550 level. Demand for the US dollar remains strong amid ongoing geopolitical tensions. Additional pressure comes from rising oil prices, which are strengthening inflation expectations and fueling forecasts of a more hawkish stance by the US Federal Reserve. This supports the dollar and limits the upward potential for gold as a non-yielding asset.

Among the latest geopolitical developments was a drone attack that caused a fire at the Barakah nuclear power plant in the United Arab Emirates (UAE). At the same time, Saudi Arabia announced that it had intercepted three drones launched from Iraq and emphasized its readiness to respond swiftly to any threats to its sovereignty and security. Meanwhile, US President Donald Trump warned Iran to accelerate the negotiation process or face serious consequences. In a post on Truth Social, he stated that "time is running out" and that without rapid action "nothing will remain," underscoring the critical importance of urgent decisions.

These statements are increasing the risks of further escalation in the Middle East and, amid stalled peace talks, are reducing the likelihood of an agreement between the US and Iran. As a result, the dollar's status as a safe-haven asset and global reserve currency is strengthening.

Another contributing factor is the US blockade of Iranian ports and the effective restriction of shipping through the Strait of Hormuz, which has pushed oil prices to their highest levels in the past two weeks and intensified expectations of tighter Federal Reserve monetary policy in 2026.

According to the CME Group's FedWatch Tool, market participants now estimate the probability of interest rate hikes by the end of this year at more than 50%. This fundamental backdrop is helping to maintain elevated US Treasury yields, which in turn supports the dollar and limits gains in gold.

Taken together, these factors suggest that the path of least resistance for XAU/USD remains to the downside. Any recovery attempts are likely to face active selling pressure and remain limited, especially in the absence of significant US macroeconomic data releases on Monday.

In the coming days, investors will focus on the release of the FOMC meeting minutes on Wednesday, which could provide additional guidance regarding the future direction of monetary policy. Preliminary PMI data from several countries are also expected later this week. At the same time, geopolitical developments may remain a key source of volatility, supporting demand for the dollar and influencing gold price movements.

Physical gold markets are showing mixed trends: in India, discounts on gold reached record levels last week, while in China, strong investment demand for bullion is keeping premiums over global prices elevated. Nevertheless, these factors are unlikely to provide sustained support for gold, as geopolitical tensions, inflation risks, and expectations of tighter Fed policy continue to favor the dollar.

From a technical perspective, oscillators remain negative, while prices are trading below the important 100-day and 20-day moving averages. If prices fail to hold above the psychological $4,500 level, the decline could accelerate toward the 200-day SMA. A move above the 20-day SMA would open the way for another attempt to overcome the 100-day SMA. However, since oscillators remain negative, the path of least resistance continues to point downward.