Gold (XAU/USD) continues to recover after hitting a monthly low the previous day, reaching the $4,650 level. The U.S. dollar continues to weaken, but the decline may be limited amid the Federal Reserve's more hawkish stance, combined with prolonged tensions between the U.S. and Iran, thereby capping significant gains in the precious metal.

As expected, the Federal Reserve kept the key interest rate unchanged at 3.50%–3.75%. Notably, this decision saw the highest level of disagreement since 1992, with three committee members voting against a softer tone in the statement. At the post-meeting press conference, outgoing Fed Chair Jerome Powell clarified that discussions focused on maintaining a neutral tone rather than the need to raise interest rates. Nevertheless, traders sharply revised their expectations for further policy easing in 2026 and now price in more than a 10% probability of a rate hike by year-end.

This decision comes amid a sharp rise in energy prices due to the conflict, exacerbating inflation concerns and coinciding with stalled peace negotiations between the U.S. and Iran. In recent developments, U.S. President Donald Trump rejected Iran's new proposal to end the two-month conflict, stating that no peace agreement would be reached with the Islamic Republic unless it agrees to shut down its nuclear program. Trump also added that a naval blockade of Iranian ports continues to worsen supply disruptions through the strategic Strait of Hormuz.

These factors continue to support the dollar's role as a reserve currency, thereby limiting potential gains in gold prices. Nevertheless, the XAU/USD pair has currently broken its three-day losing streak, although the current fundamental backdrop calls for caution before opening new long positions.

Traders should pay attention to upcoming U.S. economic data releases, including the preliminary Q1 GDP report and the Personal Consumption Expenditures (PCE) index. These reports, along with policy updates from the Bank of England and the European Central Bank, are expected to introduce volatility into the market.

From a technical perspective, as long as oscillators remain negative and gold trades below the 20-day SMA, bulls have limited chances. Only a break above the 20-day SMA would give bulls an advantage. Immediate support lies at $4,550, but if prices fail to hold the round $4,500 level, a decline toward the 200-day EMA could accelerate.