Gold Holds Above 3-Month Low Ahead of Fed Decision

Key Moments

Gold Under Pressure as Dollar Strength Persists

Gold (XAU/USD) remains on the back foot heading into Tuesday’s European trading, with sellers attempting to push prices further below the key $4,000 psychological threshold amid broad-based US Dollar (USD) strength. Despite the weakness, the metal is still trading above the three-month trough set on Monday, as market participants avoid large new positions ahead of the conclusion of the Federal Open Market Committee (FOMC) meeting on Wednesday.

Recent remarks from Federal Reserve (Fed) officials have indicated there is no immediate need to lift interest rates. Nonetheless, market pricing still reflects more than an 80% likelihood that the Fed will raise rates again at its December meeting. Persistent inflation concerns tied to higher energy costs are helping maintain expectations for additional policy tightening. Against this backdrop, investors are closely focused on the FOMC statement and comments from Fed Chair Kevin Warsh at the post-meeting press conference, especially in the absence of updated economic projections.

Data and Policy Signals in Focus for Gold and the Dollar

In addition to the Fed decision, the upcoming releases of the Advance US Q3 Gross Domestic Product (GDP) report and the Personal Consumption Expenditures (PCE) Price Index are expected to provide further insight into the central bank’s potential policy trajectory. These indicators are likely to be pivotal for the USD’s direction and, by extension, for non-yielding assets such as gold.

Ahead of these key risk events, a modest rebound in US bond yields from a recent three-week low is lending support to the greenback. At the same time, ongoing tensions in the Middle East are reinforcing the USD’s appeal as a safe-haven asset. Together, these forces are limiting the scope for any sustained recovery in XAU/USD in the near term.

Middle East Tensions Add to Dollar’s Safe-Haven Appeal

The geopolitical risk premium remains elevated amid stalled negotiations between the United States and Iran and renewed attacks by Iran-aligned Houthis on Saudi Arabia. Houthis stated on Monday that they had targeted Saudi Arabia’s East-West crude oil pumping stations and Riyadh airport. Separately, the Lebanese armed group Hezbollah is reportedly preparing for a ​possible resumption of hostilities with Israel, which is undermining hopes for a swift stabilization in the region.

These developments are bolstering safe-haven demand for the USD and are broadly negative for gold prices, suggesting that the prevailing directional bias for XAU/USD is still skewed to the downside.

Technical Picture: Bias Still Bearish Despite Momentum Stabilization

From a technical standpoint, gold maintains a negative short-term structure after breaking down from a recent consolidation range. The metal is trading well below the 200-period Simple Moving Average (SMA) on the 4-hour chart, currently at $4,198.08, which is acting as a key ceiling for any attempted recovery.

At the same time, some momentum gauges are showing tentative stabilization. The Moving Average Convergence Divergence (MACD) indicator is positioned above the zero line and continues to edge higher, while the Relative Strength Index (RSI) has risen from oversold territory toward the mid-30s. This combination points more to a potential corrective bounce than to a confirmed change in the prevailing downward trend.

To reinforce expectations for further weakness, traders will be looking for a clear and sustained move below $4,000. On the upside, initial resistance is located near the former range floor in the $4,065-$4,075 band. A break above this zone would expose the $4,100 handle, followed by a possible test of the 200-period SMA and the $4,200 round level. A lasting move above that broader resistance area would be needed to diminish the current bearish bias and signal room for a more notable recovery in XAU/USD.