Gold Holds Below $4,350 Ahead of Federal Reserve Decision

Key Moments

Gold Edges Higher but Stays Constrained Ahead of Fed

Gold (XAU/USD) is attempting to recover from an early pullback in Wednesday’s Asian session but remains confined below the $4,350 mark. A brief consolidation in the US Dollar, which recently touched a two-week high, is providing some support to the metal. Even so, market participants are reluctant to establish significant new positions as they await a major central bank decision.

The Federal Reserve is due to release its policy decision later today following its September 15-16 meeting. Market consensus points to a 25 basis point increase in interest rates. Beyond the rate move itself, investors are focused on the Fed’s updated economic projections and the accompanying dot plot, which outline policymakers’ views on the future rate path. Comments from Fed Chair Kevin Warsh at the post-meeting press conference are also expected to be closely examined for clues on the direction of monetary policy. These signals are likely to be a key driver of near-term USD performance and, by extension, the outlook for non-yielding assets such as gold.

Macro Backdrop: Inflation Risks, Yields, and Geopolitics

Concerns about energy-related inflation are maintaining expectations that the Fed could continue to tighten policy. On Tuesday, crude oil prices climbed to a new high since May 20 amid mounting worries over supply disruptions in the Middle East. At the same time, a sharp increase in public and corporate borrowing has contributed to a broad-based selloff in global bonds. This has pushed the yield on the benchmark 10-year US Treasury beyond the 5% level for the first time since 2023, taking it to its highest point since 2007.

These developments, together with rising geopolitical risks, are supporting the safe-haven appeal of the US Dollar, which in turn is limiting the upside for gold. Higher yields and continued USD strength, if sustained, could act as a headwind for bullion even if risk sentiment remains fragile.

Middle East Tensions Add to Safe-Haven Flows

Geopolitical risk in the Middle East continues to intensify. Saudi Arabia has issued security alerts across several areas, including Mecca and Jeddah, after a series of attacks over the past week by Iran-aligned Houthi forces in Yemen. The Saudi-led coalition has vowed to respond “firmly” to missile and drone attacks by the group, heightening the risk of further regional escalation.

In parallel, the US Central Command reported that it has redirected 103 commercial vessels as part of its blockade on Iranian maritime trade through the Strait of Hormuz. This move has lent additional support to crude oil prices and bolstered the bullish narrative for the US Dollar, adding another layer of pressure on gold prices.

Technical Landscape for XAU/USD

From a technical perspective, gold is demonstrating some firmness below the 50-day Simple Moving Average (SMA) and is currently trading just above the 50% Fibonacci retracement of the July-August advance. However, momentum indicators are signaling a loss of upward strength. The Moving Average Convergence Divergence (MACD) remains in negative territory, and the Relative Strength Index (RSI) is hovering just below the 50 mark. Together, these signals point to a moderation in bullish momentum even as price holds above an important moving average.

On the upside, additional gains may first encounter resistance near the 38.2% retracement at around $4,413. Above that, a more substantial barrier is located near the 23.6% retracement level around $4,520, an area where selling pressure has previously emerged. On the downside, immediate support is seen at the 50.0% retracement close to $4,326, backed up by the 50-day SMA near $4,280. A sustained move below the latter could open the door toward the 61.8% retracement around $4,240, followed by deeper retracement levels near $4,116 and $3,959.