Gold Holds Gains as Fed Stance and Mideast Risk Support

Key Moments

Gold Attempts Stabilization Above $4,000

Gold (XAU/USD) is posting slight intraday gains above the $4,000 psychological threshold in early European trading, after breaking a two-day losing streak that had driven prices to a three-month low. The move higher, however, remains tentative, with limited follow-through buying, prompting investors to be wary about calling a sustained rebound in the metal.

Recent commentary from Federal Reserve (Fed) officials has indicated no immediate rush to resume interest rate hikes. Even so, market participants continue to assign roughly an 80% probability that the Fed will raise borrowing costs before the end of the year. At the same time, ongoing geopolitical strains are supporting demand for the safe-haven US Dollar (USD), creating a counterweight to gold’s recovery attempts.

US PMI Data Reinforces Hawkish Fed Expectations

S&P Global’s flash US Manufacturing Purchasing Managers’ Index (PMI) climbed to 56 in October, a 53-month high and above expectations for a reading of 55.6. The Services PMI printed in line with forecasts at 57.9, down from 58.8 in September, while the Composite Output Index eased to 57.6 from the prior month’s five-year high of 58.4.

Additional PMI details showed the output price index advancing to 59.8, its highest level since August 2022. This points to potential further upside in inflation and suggests price pressures could remain elevated in the period ahead. Coupled with inflation concerns linked to higher energy prices, the data strengthens the case for additional Fed tightening. That backdrop limits the appeal of non-yielding gold and caps the metal’s near-term upside.

Geopolitical Risk Supports USD but Limits Gold’s Declines

Crude oil prices have surged to their highest level since September 16 amid renewed supply fears driven by attacks in Saudi Arabia and broader tensions involving Iran. In the latest escalation, the Iran-backed Houthis in Yemen vowed on Sunday that they will keep attacking Saudi Arabia’s King Khalid Airport in Riyadh.

Furthermore, stalled US-Iran negotiations are keeping a geopolitical risk premium embedded in markets, helping to prevent deeper losses in the safe-haven Greenback. This dynamic argues for caution before committing to aggressive long positions in gold, as the stronger USD continues to act as a drag on bullion prices.

Against this backdrop, many traders may prefer to pare risk or remain on the sidelines ahead of a dense calendar of central bank decisions and key US data later this week, including the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index on Thursday.

FOMC Decision and Other Central Banks in Focus

The primary event risk for markets will be the conclusion of the Fed’s two-day FOMC policy meeting on Wednesday. With no updated economic projections scheduled, investors are expected to scrutinize the accompanying statement and any comments from Fed Chair Kevin Warsh at the post-meeting press conference for clarity on the future policy trajectory. Those signals will be critical for near-term USD performance and, by extension, for gold.

In parallel, the Reserve Bank of New Zealand (RBNZ), the European Central Bank (ECB) and the Bank of Japan (BoJ) are also set to deliver rate decisions this week. The confluence of these announcements could inject additional volatility into XAU/USD. Even so, the broader fundamental setting continues to argue for prudence before concluding that gold has carved out a durable bottom.

XAU/USD Technical Picture

On a 4-hour chart basis, gold retains a bearish short-term structure after last week’s break below a key short-term range floor near $4,100. Repeated failures to clear the 100-period Exponential Moving Average (EMA) have reinforced the negative bias, indicating that the latest bounce is, so far, more consistent with a corrective move within a broader downtrend.

In this context, any further upticks are likely to encounter selling interest, with initial resistance seen around the former support zone at $4,100. Above that, the next technical barrier is aligned with the 100-period EMA, currently near $4,135.95. A sustained push through this level would be required to suggest a more constructive setup and open the door to additional upside toward the $4,200 handle.