Gold Prices Slump as Geopolitics Boost USD Ahead of FOMC Meeting

Gold prices weakened on Tuesday, dipping below $4,050 in the Asian session as geopolitical tensions continued to support the US Dollar. The precious metal has been under pressure from rising USD demand ahead of the Federal Reserve's (Fed) two-day policy meeting, which is set to take place on Wednesday.

The recent breakdown below the 200-day Simple Moving Average (SMA) and mixed momentum indicators suggest that gold may be vulnerable to further losses unless buyers can quickly defend the recent lows around $4,000. The top boundary of the trading range near $4,200 remains a key resistance level for gold.

Meanwhile, the US Dollar index was seen as a safe-haven asset amid concerns over disruptions to global energy supplies and rising tensions between the US and Iran. Oil prices were also affected by the renewed hopes for US-Iran diplomacy to end the five-month-old conflict.

The outcome of the FOMC meeting will play a crucial role in driving USD demand and providing a fresh directional impetus to gold. Traders may refrain from placing aggressive bets on the XAU/USD pair until after the meeting, as they wait for strong follow-through selling and acceptance below $4,000.