$4,300 Gold Price Support Tested Amid Middle East Tensions and Hawkish Bets on Fed

Gold's recovery from six-week lows is fragile as traders focus on the escalating conflict in the Middle East and the upcoming US Federal Reserve monetary policy meeting. Despite a brief surge above $4,300 early Tuesday, gold remains vulnerable to further losses amid rising tensions in the Gulf and hawkish bets around the Fed's policy outlook.

The conflict in the Middle East has intensified with Yemen's Iran-backed militant group launching an attack on Saudi Arabia, while oil prices have surged due to concerns of a regional war. This has kept the US dollar underpinned near weekly highs against its major currency rivals, posing a risk to gold's recovery.

Strategists at Scotiabank believe that recent market dynamics justify the dollar's firm tone into the FOMC meeting, but caution that there are still risks around the outlook. They note that an unchanged decision from the Fed would be a shock for markets and a clear negative for the USD, while even a dovish hike 'which does not obviously commit to additional moves' would also likely weigh on the dollar.

The technical analysis suggests that gold remains in bearish territory, with the 14-day Relative Strength Index around 45 keeping a slightly negative tone. The 50-day SMA at $4,275.85 offers first support, while the 100-day SMA near $4,329.01 and the 21-day SMA around $4,450.09 form resistance levels.