Gold (XAUUSD) Price Forecast: Will Fed Dovishness and Mideast Tensions Trigger a Record Gold Rally?

Fed Pause and Middle East Risk Keep Bullish Momentum Intact

Gold closed the week near record territory as traders priced in both geopolitical risk and an increasingly dovish Federal Reserve. Spot gold climbed to $3,426 on Friday, with futures pushing toward $3,443, setting the stage for a potential breakout above the all-time high of $3,500.20.

Last week, XAU/USD settled at $3422.84, up $122.86 or +3.71%.

Middle East Conflict Drives Safe-Haven Demand

Gold’s rally has been fueled by escalating military conflict between Israel and Iran. Israeli strikes targeted key nuclear and missile facilities, killing senior Iranian figures. Iran responded with drone and missile attacks, raising fears of broader regional involvement. Markets reacted strongly, with crude oil spiking and investors shifting into safe-haven assets like gold and Treasuries. This geopolitical premium has underpinned bullish sentiment throughout the week.

Fed Set to Hold Rates, All Eyes on Dot Plot

The upcoming Federal Reserve policy meeting on June 18 is not expected to result in any rate changes. Futures markets place a 99.7% probability that the Fed will keep rates steady at 4.25%–4.5%. With a hold priced in, trader focus will shift to the Fed’s updated “dot plot” and Chair Powell’s press conference for guidance on future rate cuts.

Despite softer inflation data this week, including CPI at 0.1% and PPI rising just 2.6% year-over-year, the Fed is unlikely to commit to immediate action. According to Glenmede’s investment team, policymakers are expected to monitor inflation through the summer before considering any moves. Markets continue to price in two rate cuts later this year, likely in the second half.

Dollar Recovers, But Can’t Break Gold’s Momentum

The dollar staged a modest recovery from recent lows, with the dollar index rising to 98.33. However, the rebound did little to deter gold’s momentum. Rising yields earlier in the week were reversed by renewed haven buying, with 10-year yields holding near 4.37%. The combination of dovish monetary expectations and geopolitical stress continues to support gold despite temporary dollar strength.

Forecast: Gold Prices Bullish Heading Into Fed Meeting

With the Fed expected to hold steady and signal patience, gold remains well-positioned to challenge its all-time high. Traders will closely analyze the updated dot plot and Powell’s tone for signs of policy easing later this year.

Unless the Fed signals a sharply hawkish pivot or Middle East tensions ease significantly, the gold prices forecast remains bullish in the near term.

A confirmed breakout above $3,500.20 would open the door to fresh record territory, supported by safe-haven flows and softening monetary policy expectations.

More Information in our Economic Calendar.