Gold has managed to find its footing and bounce off the lowest levels since fall 2025, thanks to the de-escalation of the conflict in the Middle East. First, Donald Trump canceled bombings on Iran, and then announced a deal with the country. This was enough for XAU/USD quotations to return above $4,300 per ounce. Now the precious metal is preparing for a test in the form of the FOMC meeting led by new Chair Kevin Warsh.

The conflict in the Middle East created numerous headwinds for gold. Higher oil prices fueled U.S. inflation, increased yields on U.S. Treasury bonds, and raised the chances of a Federal Reserve rate hike. At the same time, the U.S. dollar strengthened. Rumors of a deal between Washington and Tehran suggested that a price bottom had been reached, and XAU/USD is beginning its upward journey.

The Dynamics of Gold and U.S. Treasury Yields

The decline in gold was fueled by capital outflows from specialized exchange-traded funds (ETFs), as their inventories move with the price, along with a reduction in central bank activity in the bullion market. These factors are sure to come back into play and support XAU/USD as headwinds weaken. For instance, a recent WGC survey shows that 45% of 76 central banks plan to increase gold purchases over the next 12 months, with only one central bank planning to sell. This figure represents the highest ever recorded in the survey's history.

The first serious test on gold's road north will be the June FOMC meeting. The surge in the precious metal to record highs in early 2026 was driven by expectations that the Fed's monetary expansion cycle would continue following three rate cuts at the end of last year. The drop in XAU/USD from April to June occurred against a backdrop of rising probabilities of a monetary policy tightening.

The Fed's position is extremely important in clarifying gold's fate. Additionally, the growing uncertainty surrounding the change in Fed leadership is causing traders to close out positions in the precious metal ahead of the announcement of the two-day FOMC meeting results, leading to short-term consolidation.

Warsh advocates for more action and less talk. According to him, the central bank has become a hostage to its own words. Projections reflect what he once thought. However, conditions are constantly changing, making previous estimates meaningless. For example, in March, the Fed anticipated a single rate cut to the federal funds rate. Investors expect borrowing costs to remain unchanged, with a few officials voting for a rise in 2026.

Technically, on the daily gold chart, a Wolf Wave pattern is being formed. A rebound from point 5 followed by the continuation of the rally provides grounds for predicting a rise in quotations to $5,200 per ounce. A breakout of the pivot level at $4,350 will serve as a catalyst for purchases.