Gold Under Pressure as Fed Bets and Dollar Limit Upside

Key Moments

Gold Extends Decline Near Three-Month Low

Gold (XAU/USD) is trading with a negative bias for a second consecutive session, unable to build on a modest intraday recovery from below the $4,000 psychological level, which also marked a three-month low in Asian trading on Friday. Follow-through selling has emerged as a combination of macro and geopolitical factors continues to limit any meaningful upside in the metal.

The Federal Reserve has recently indicated there is no immediate need to lift interest rates, but futures pricing still reflects expectations of around an 80% chance that policymakers will deliver another rate hike at the December meeting. In addition, concerns over inflation linked to higher energy prices are reinforcing the possibility of further Fed tightening, a backdrop that remains unfavorable for non-yielding assets such as Gold.

Geopolitical Tensions and Oil Keep Inflation Fears Elevated

Crude oil prices are holding near a one-month high reached on Tuesday, underpinned by supply worries stemming from intensifying violence in the Middle East. The conflict between Saudi Arabia and Yemen’s Iran-backed Houthi movement has escalated sharply, with Houthi forces launching drone and missile attacks on Saudi airports and critical energy infrastructure.

Adding to tensions, Iran’s Islamic Revolutionary Guard Corps (IRGC) stated that further US strikes could lead Tehran to invade neighboring countries and target facilities involved in US military operations as part of a new offensive posture. This development coincides with a report that the US and Israel have formulated plans for a short but intense military campaign against Iran after the US midterm elections, sustaining a geopolitical risk premium across markets.

Fed Outlook Supports USD, Adds Pressure on Bullion

Expectations for a hawkish Fed stance are contributing to a modest rebound in the safe-haven US Dollar from a three-week low, exerting additional downward pressure on Gold prices. At the same time, traders appear reluctant to initiate large new positions in either direction ahead of key policy and data events, preferring to wait for clearer signals on the Fed’s next steps.

The focus is now on the upcoming two-day FOMC meeting, which begins next Tuesday. The Fed is scheduled to announce its policy decision on Wednesday and is widely anticipated to keep interest rates unchanged. With no updated economic projections on the agenda, market participants will closely examine the policy statement and remarks from Fed Chair Kevin Warsh at the post-meeting press conference for guidance on the future policy path.

Upcoming US Data Could Drive Next Move in XAU/USD

Following the Fed decision, attention will quickly turn to the Advance US Q3 GDP release and the US Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, both due next Thursday. These data points are expected to be key drivers for the US Dollar and, by extension, for XAU/USD, providing fresh directional impetus after the current consolidation near multi-month lows.

Technical Picture: Downtrend Intact, but Support Holds

From a technical standpoint, the decisive move below the lower boundary of a recent short-term trading range, accompanied by a sustained close under the $4,100 level overnight, has been interpreted as an important bearish signal for XAU/USD. Momentum indicators support this view: the Relative Strength Index (RSI) stands at 34.34, hovering just above oversold territory, while the Moving Average Convergence Divergence (MACD) reading of -6.51 remains in negative territory. These readings indicate that downside pressure persists even as early signs of stabilization emerge.

Despite the prevailing weakness, Gold is demonstrating some firmness just under the $4,000 psychological area, suggesting that sellers may be cautious about aggressively pursuing additional downside at current levels. This support zone is therefore critical for near-term sentiment.

Key Technical Levels for Traders

On the upside, any rebound is likely to face selling interest near the former range floor, now acting as resistance in the $4,065-$4,070 band. A further barrier sits at the $4,100 round figure. A clear break above $4,100 could force short-covering, potentially propelling XAU/USD toward an intermediate resistance near $4,170 and then the $4,200 level. Only a sustained move and acceptance above $4,200 would begin to build the case for a more durable near-term recovery.

US Dollar Performance Snapshot

The article notes that the US Dollar was the strongest against the Australian Dollar in today’s session. The following table is described as showing percentage changes of the US Dollar (USD) against major currencies, indicating relative strength and weakness across the FX complex.