- Gold struggles to build on the overnight gains as the USD attracts buyers for the third straight day.
- Fed hike bets, rebounding US bond yields and geopolitical risks continue to underpin the USD.
- The downside for the XAU/USD pair seems limited as traders await the crucial FOMC decision.
Gold (XAU/USD) remains depressed heading into Tuesday’s European session, with bearish traders looking to extend the slide further below the $4,000 psychological mark amid a broadly firmer US Dollar (USD). The precious metal, however, holds above a three-month low touched on Monday, as traders refrain from placing aggressive directional bets and opt to wait for the outcome of the two-day FOMC policy meeting on Wednesday.
Federal Reserve (Fed) officials recently signaled that there is no urgency to raise interest rates. Traders, however, are still pricing in over an 80% chance that the US central bank will raise borrowing costs again at the December policy meeting. Moreover, inflation fears stemming from elevated energy prices underpin prospects for further Fed tightening. Hence, the focus will remain glued to the accompanying policy statement and Fed Chair Kevin Warsh's comments during the post-meeting press conference in the absence of updated economic projections.
Apart from this, the release of the Advance US Q3 GDP and the Personal Consumption Expenditures (PCE) Price Index will be looked upon for more cues about the Fed's future policy path. The outlook, in turn, will play a key role in influencing the US Dollar (USD) price dynamics and provide some meaningful impetus to the non-yielding Gold. Heading into the key central bank event and data risks, a modest recovery in US bond yields, following the recent decline to a three-week low, along with Middle East jitters, underpins the safe-haven buck.
The geopolitical risk premium remains in play amid stalled US-Iran talks and renewed attacks by Iran-aligned Houthis on Saudi Arabia. In fact, Houthis said on Monday they had attacked Saudi Arabia's East-West crude oil pumping stations and Riyadh airport. Adding to this, Lebanese armed group Hezbollah is reportedly preparing for a possible resumption of hostilities with Israel, dampening hopes of immediate stability in the region. This, in turn, favors USD bulls and suggests that the path of least resistance for gold remains to the downside.
XAU/USD 4-hour chart
Technical Analysis
The commodity maintains a bearish near-term tone following the recent breakdown through a short-term trading range. Moreover, the precious metal holds well below the 200-period Simple Moving Average (SMA) on the 4-hour chart, at $4,198.08, which acts as the primary cap on the upside. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator shows the line above zero and advancing, and the Relative Strength Index (RSI) has recovered toward the mid-30s from oversold territory. Slight improvement in momentum indicators only hints at a corrective bounce rather than a clear shift in trend.
That said, acceptance below $4,000 is needed to back the case for deeper losses. On the topside, initial resistance is defined by the trading range breakpoint, around the $4,065-$4,075 region. This is followed by the $4,100 mark, above which the XAU/USD pair could aim to test the 200-period SMA and reclaim the $4,200 round figure. A sustained strength above this barrier would ease the prevailing downside bias and open the way for a more meaningful recovery.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Euro.
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.