Gold Near $4,200 as Soft Yields Weigh, Fed Limits Upside

Key Moments

Gold Holds Firm as Dollar Eases from Recent Highs

Gold (XAU/USD) is extending its constructive tone into the European session, trading around the psychologically important $4,200 level and hovering near the one-week high reached earlier on Friday. The metal is benefiting from a second consecutive day of gains as the US Dollar retreats from its April 2025 peak, pressured by softer US bond yields and associated profit-taking in the currency.

The advance in bullion, however, remains tempered. Market participants see scope for only limited and shallow US Dollar losses, as ongoing geopolitical risks and a firmly hawkish Federal Reserve stance are expected to constrain any deeper downside in the Greenback and, in turn, curb the scale of gold’s recovery from the two-month low hit on Wednesday.

Geopolitics, Oil, and Inflation Expectations

President Donald Trump said on Thursday that the US would refrain from resuming military strikes on Iran before the November 3 midterm elections and added that the US was engaged in productive discussions with Iran. This helped check gains in crude oil prices and eased some fears about a renewed inflation surge. In parallel, a well-supported 30-year US Treasury auction triggered a pullback in long-dated yields, prompting US Dollar bulls to lock in some gains. That retreat in yields and the currency has provided a near-term tailwind for gold.

At the same time, investors remain uneasy about inflation risks tied to erratic energy prices against the backdrop of the US-Iran standoff over Tehran’s nuclear program, intensifying conflicts in the Middle East, and disruptions around the Strait of Hormuz. US Vice President JD Vance said that Iran must make a meaningful reduction ​in its nuclear enrichment capacity to satisfy US demands and end the seven-month-old war. Iran’s Atomic Energy Chief Mohammad Eslami, however, rejected US demands to abandon Uranium enrichment or give up its stockpiles.

Ongoing clashes between Iran-aligned Houthi forces in Yemen and the Saudi-led coalition are also helping to maintain a geopolitical risk premium across markets. Despite the latest easing in yields, traders still see more than an 80% probability that the Federal Reserve will raise interest rates by the end of this year, supporting the case for dip-buying in the US Dollar. That backdrop continues to act as a headwind for non-interest-bearing gold as market participants await preliminary readings of the University of Michigan US Consumer Sentiment and Inflation Expectations Index for additional direction.

UOB Expects Extended Fed Tightening Path

UOB Group analysts maintain their view that the Fed’s hiking cycle could stretch into early 2027. They reiterate that, “we expect two additional hikes, in Dec 2026 and 1Q 2027, thereafter on hold for rest of 2027 as inflation fades in a more durable fashion in the later part of 2027 as the most likely course.”

At the same time, they emphasize that they “continue to keep in mind the risks of further policy tightening if the inflation trajectory becomes more persistent by the combination of higher energy prices, trade tariffs and AI-related factors.” Looking at the near-term calendar, UOB has “ruled out a back-to-back rate hike in the October FOMC, which falls less than a week from the midterm elections (3 Nov),” highlighting their assessment that policymakers are unlikely to take another step so close to a key political event.

XAU/USD Technical Picture: Range-Bound With Overhead Hurdles

On the technical front, XAU/USD continues to trade within a well-defined band that has contained price action for roughly the past two weeks. The pair is holding above the 78.6% Fibonacci retracement of the June-August advance, showing notable resilience despite repeated tests of that area.

Momentum indicators are turning more constructive. The Moving Average Convergence Divergence (MACD) is moving higher, with the latest reading at 5.33, while the 14-period Relative Strength Index (RSI) is pushing up toward 59. Together, these signals point to improving upside momentum, although buyers have yet to decisively overcome key resistance levels.

The upper boundary of the recent consolidation, centered near $4,200, continues to represent an initial and important barrier. Above this, the 100-period Simple Moving Average on the 4-hour chart, currently around $4,227, and the 61.8% Fibonacci retracement at $4,231 create a dense resistance cluster. A sustained break through this zone would expose the 50.0% retracement at $4,320, followed by the 38.2% level at $4,409. The 23.6% retracement at $4,519 stands as a more distant upside target.

On the downside, first support is aligned with the 78.6% Fibonacci retracement at $4,104. This level is expected to attract buying interest on any pullback, although the broader outlook remains constrained by the significant resistance structure overhead.