Gold Holds Firm as Dollar Softens, Upside Stalls Below $4,450

Key Moments

Gold Supported by Softer Dollar and Yields

Gold (XAU/USD) trades with a constructive tone heading into the European session on Thursday, building on a second day of follow-through buying. The metal is holding gains but remains capped beneath the $4,450 area, reflecting mixed underlying drivers.

Pressure on the US Dollar from declining US bond yields and a weaker US ADP employment report released on Wednesday has helped extend gold’s rebound from a nearly four-week low. This combination has encouraged some dip-buying interest in the metal after its recent correction.

However, the broader backdrop is not unequivocally supportive. Growing expectations of additional interest rate hikes by the US Federal Reserve and concerns over renewed inflation risks from higher energy prices could underpin US yields. At the same time, ongoing geopolitical tensions are lending support to the US Dollar’s safe-haven appeal, tempering enthusiasm for more aggressive bullish positioning in gold.

Fed Expectations, Energy Prices, and Geopolitics in Focus

Data from CME Group’s FedWatch Tool indicate that market participants are assigning roughly a 62% probability that the Federal Reserve will raise rates at its upcoming September 15-16 policy meeting. Those expectations increased following hawkish comments from Fed Chair Kevin Warsh last Friday.

Persisting worries that elevated energy prices could revive inflationary pressures are reinforcing the case for further policy tightening. That dynamic may slow or limit the Dollar’s downside and, in turn, restrain demand for non-yielding bullion.

Crude oil prices are trading close to the highest levels seen since July 24, which were reached on Wednesday. The move comes as tensions between the US and Iran escalate following fresh US strikes on Iranian targets and retaliatory drone and missile attacks by Tehran across the Gulf region.

Adding to the tension, US President Donald Trump stated on Wednesday that he is prepared to authorize another attack on Iran. Ongoing clashes around the Strait of Hormuz are keeping a geopolitical risk premium embedded in markets, which is supporting both oil prices and the US Dollar.

Against this backdrop, analysts remain cautious about calling a definitive bottom for gold in the near term. Market participants may prefer to see convincing follow-through buying before concluding that a more durable recovery is underway. Many traders are also likely to wait for Friday’s US Nonfarm Payrolls (NFP) report for clearer guidance on the Fed’s policy trajectory and the next directional move in XAU/USD.

Technical Picture: Recovery Within a Larger Downtrend

The technical backdrop on the XAU/USD 4-hour chart shows signs of stabilization, but not yet a confirmed bullish reversal.

Gold closed overnight above the 23.6% Fibonacci retracement of the recent decline from an over three-month high set in August. That break, followed by additional upside, suggests scope for further gains; however, the rebound is still being interpreted as corrective within a broader downside phase.

The 38.2% retracement at $4,438 represents the first significant resistance and is reinforcing the view that recent gains are part of a corrective bounce rather than a trend reversal. A sustained move above this level would open the door toward the 100-period simple moving average (SMA) at $4,480, followed by the 50.0% retracement at $4,487 and the 61.8% retracement at $4,535. Beyond these, additional upside levels are seen at $4,604 and $4,692.

On the downside, initial support lies at the 23.6% retracement near $4,378. A more pronounced pullback below that area would bring into focus a Fibonacci-based structural support zone around $4,282.

The Moving Average Convergence Divergence (MACD) indicator has turned positive, while the Relative Strength Index (RSI) is hovering close to 49. This combination indicates a stabilizing backdrop, but not yet a strongly bullish momentum profile.