Gold Retreats from Mid-May Highs; Fails to Hold $4,700 as Fed Risks Bolster Dollar

Spot gold touched its highest level since mid-May during Tuesday's Asian session, but the rally failed to sustain, pulling back from intraday highs and losing the $4,700 mark. As of press time, spot gold was trading near $4,624.60, turning lower on the day. The U.S. dollar index remained resilient, supported by Federal Reserve policy expectations, serving as the main headwind capping further upside in gold prices.

**Dollar Strength Limits Gold's Upside**

The recent rebound in gold prices has largely benefited from sustained dollar weakness. Earlier, news of the U.S. Treasury expanding its buyback program for long-dated bonds pressured long-end Treasury yields, dragging the dollar index to a three-month low and providing upward momentum for gold. However, as markets reassess the Fed's rate outlook, the dollar's decline has slowed, raising the cost of dollar-denominated gold for investors holding other currencies and limiting gold's breakout potential. Market reports indicate investors are closely watching upcoming key inflation data, such as the core PCE price index, to gauge the Fed's subsequent policy path.

**Overbought Technicals Trigger Short-Term Pullback**

After multiple consecutive days of gains, gold's technical indicators have shown overbought signals. According to reports, the RSI on the daily chart had climbed to around 72, entering overbought territory, while the J-value of the KDJ indicator also exceeded 100 and showed signs of flattening, suggesting a technical correction was due in the short term. Gold faces strong resistance in the $4,650-$4,660 area, which corresponds to the 0.618 Fibonacci retracement level of the mid-May decline. In the absence of fresh strong catalysts, bulls opted to take profits, leading gold to pull back toward key support near $4,620.

**Long-Term Bullish Thesis Intact but Short-Term Consolidation Needed**

Despite short-term headwinds, market sentiment toward gold's medium-to-long-term outlook remains broadly optimistic. According to UBS analysts, rising global debt levels and a long-term weakening trend in the dollar underpin the bullish case for gold, with a 12-month price target of $5,400 per ounce. However, some analysts also note that with the macro narrative intact, markets need time to digest recent overbought conditions, and gold may consolidate within the $4,600-$4,700 range in the near term while awaiting clearer policy signals.