Gold prices (XAU/USD) continue to rise for the second consecutive day, reaching new weekly highs on Friday. Bulls are preparing for a breakout above the key $4,400 level before opening new positions in anticipation of further gains. The recent decline in crude oil prices has eased concerns about a rapid increase in inflation, which has led to a decline in U.S. government bond yields from multi-year highs and contributed to capital outflows into the yellow metal. However, hawkish rhetoric from the U.S. Federal Reserve is strengthening the dollar and may limit further gains in gold prices.

UOB Group analysts emphasize that the Federal Reserve's return to a rate-hiking cycle is changing expectations for the dollar. They noted: "Given that we expect two more Fed rate hikes, the expected trend toward a narrowing of the U.S. interest-rate differential relative to other G10 countries, which has pressured the DXY index since late 2024, is likely to reverse, supporting the DXY going forward." Against this backdrop, UOB is revising its previous cautious stance on the dollar. "Given these factors, we now see upside risks for the dollar both against G10 currencies and against Asian currencies," the bank's analysts added.

According to data from CME Group's FedWatch Tool, the probability of another Fed rate hike at the October meeting is estimated at 54%, while the probability for December is approximately 88%. This, along with geopolitical uncertainty, supports the dollar as a safe-haven asset and limits gains in gold prices.

Among the latest developments, it is worth noting a statement by Iran's Islamic Revolutionary Guard Corps (IRGC) regarding an attack on a Togo-flagged tanker that was allegedly attempting to pass illegally through the Strait of Hormuz. In addition, U.S. President Donald Trump stated that he was close to making an important decision on resuming operations against Iran. These developments support the perception of the dollar as a safe-haven asset.

Given this situation, traders should wait for a sustained increase in buying activity before opening positions in anticipation of further recovery in the precious metal following the decline to a six-week low recorded last week.

Today, to identify the best trading opportunities, traders may wait for the release of secondary U.S. macroeconomic data on Friday, including industrial production and capacity utilization figures. In addition, speeches by influential FOMC members and developments in the Middle East could have a significant impact on the dollar exchange rate and gold price dynamics, creating short-term trading opportunities in the XAU/USD pair.

As for technical analysis, XAU/USD is facing resistance at the round-number $4,400 level. Above this level, the 20-day SMA will also provide resistance. The pair finds support at the 200-day EMA. Below this level, the round-number $4,300 level could also provide support. The oscillators are neutral; nevertheless, the Relative Strength Index is moving toward positive territory, supporting the bulls. However, the MACD is indicating that selling pressure persists.