Gold price tumbles below $4,250 as Trump vows response to helicopter strike

Gold (XAU/USD) price plunges nearly 2% on Tuesday as tensions in the Middle East escalate afterUS President Donald Trump vowed a response to Iran's downing of a US helicopter near the Strait of Hormuz. At the time of writing, XAU/USD trades below $4,250, down 1.93% on the day.

XAU/USD tumbles as retaliation fears overpower lower yields

Market mood turned off, driven by a jump in the Volatility Index (VIX)—used by investors as insurance against stock market crashes—which is up 15% in the day, amid speculation for a possible escalation as Trump said that the “US must respond to an attack on a helicopter on the Strait of Hormuz.”

A New York Times article reported that the US and Iran are polishing four issues regarding Tehran’s nuclear enrichment program, which opens the door for a ceasefire agreement.

Earlier, Automatic Data Processing (ADP) released its 4-week moving average, which showed that hiring in private companies slowed from 35.75K to 29K. Nevertheless, traders are focused on the US inflation data release. May’s Consumer Price Index (CPI) is projected to rise from 3.8% to 4.2% YoY, while underlying CPI is foreseen to tick a tenth up from 2.8% to 2.9% YoY.

If the US CPI comes in aligned with estimates or higher, bullion prices would be pressured, as the Federal Reserve (Fed) might be forced to hold rates unchanged throughout 2026 or to raise borrowing costs to tame high inflation.

As of writing, the swaps market have priced in 23 basis points of Federal Reserve tightening by the end of 2026, according to Prime Terminal data.

Worth noting that Gold prices are falling in tandem with US Treasury yields. The US 10-year Treasury note yield falls 3.5 basis points to 4.532%, which is usually a tailwind for bullion.

The US Dollar Index (DXY), which measures the buck's performance against a basket of six currencies, edges down 0.09% to 99.91.

XAU/USD technical outlook: Gold mildly bearish below the 200-day SMA

Price action shows Gold’s downtrend may continue after XAU’s spot price plunged below the 200-day Simple Moving Average (SMA) at $4,440, a level investors use as an indicator of an asset's bullish or bearishness.

The Relative Strength Index (RSI) is accelerating its decline toward oversold territory, an indication that sellers have been gathering momentum. Therefore, the likely trend is for XAU to continue drifting lower.

If XAU/USD drops below the June 8 low of $4,268, the next support levels are $4,200 and then $4,098, the March 23 cycle low. Going further down, $4,000 becomes a significant support area.

On the upside, Gold must reclaim the 200-day SMA at $4,440. Breaking above this level could push prices toward $4,500, with possible resistance at $4,550. Above that, the next targets are the 50-day SMA at $4,619 and the 100-day SMA at $4,788.