Gold prices held their recovery gains near $4,050 during Wednesday's European trading session. However, further upside remained limited amid sustained demand for the US Dollar. Stronger-than-expected US inflation data released on Tuesday fueled expectations of a more aggressive monetary tightening approach by the US Federal Reserve (Fed). This helped the Greenback maintain its recent strong gains, despite growing hopes for diplomatic progress between the United States and Iran.
The XAU/USD pair showed resilience below the 200-hour Simple Moving Average (SMA) near $4,024, indicating underlying trend support. However, the precious metal remained capped below the 23.6% Fibonacci retracement level at $4,080, keeping the short-term outlook broadly neutral after repeated failures to break through horizontal resistance near $4,150.
Meanwhile, the Relative Strength Index (RSI) hovering around 41 suggests only moderate exhaustion in selling pressure. The Moving Average Convergence Divergence (MACD) indicator has recovered into positive territory, signaling fading bearish momentum rather than a clear bullish acceleration.
As a result, further upside could encounter initial resistance near the 23.6% Fibonacci retracement at $4,080. A sustained break above this level could open the way toward the $4,145–$4,150 resistance zone, where stronger selling pressure is expected to emerge.
On the downside, initial support is located at the 50.0% Fibonacci retracement level around $4,008, followed by the 61.8% retracement near $3,975. Deeper support is seen around $3,929, with the broader cycle low near $3,870 remaining a key downside reference.
US Secretary of State Marco Rubio said on Tuesday, following a meeting of G7 foreign ministers in Paris, that the economic campaign against Iran had been so devastating that a major military operation was no longer necessary.
His comments came as US President Donald Trump played down concerns about further escalation following the midterm elections. Trump told reporters that renewed US military strikes against Iran were highly unlikely, adding that positive momentum was building behind negotiations aimed at ending the Middle East conflict.
Meanwhile, Iran urged Washington to meet its demands under a proposal to reopen the Strait of Hormuz.
These developments fueled optimism about a potential diplomatic breakthrough to end the US-Iran war, limiting demand for the US Dollar as a safe-haven asset.
However, growing confidence that the Federal Reserve could raise borrowing costs in December, supported by Tuesday's US Consumer Price Index (CPI) report, continued to underpin USD demand.
According to the US Bureau of Labor Statistics (BLS), headline CPI increased by 0.4% in October, exceeding market expectations of 0.3%. Core CPI, which excludes volatile food and energy prices, also rose by 0.3%, matching September's increase and surpassing economists' forecasts of 0.2%.
Furthermore, Fed Governor Christopher Waller warned that a stronger-than-expected 0.3% reading in core CPI could prompt him to consider a larger 50-basis-point (bp) interest rate increase at the December 8–9 policy meeting.
Waller added that limiting the increase to just 25 basis points could put the Fed's credibility at risk.
Philadelphia Fed President Anna Paulson also noted that maintaining restrictive monetary policy would be necessary to bring inflation back toward the 2% target. Meanwhile, Dallas Fed President Lorie Logan suggested that interest rate increases might need to happen at a faster pace than previously anticipated.
These increasingly hawkish comments provided additional support for the US Dollar and could continue to weigh on Gold prices.
Waller Signals December Rate Hike Risk as Fed Hawkishness Intensifies
Federal Reserve Governor Christopher Waller delivered a significantly more hawkish message, receiving an FXS Speechtracker score of 9/10, well above the historical average of 7.3/10. The score highlights a clear bias toward further monetary tightening.
Waller's conditional support for a potential half-percentage-point rate increase in December, should October core CPI come in at around 0.3% or higher, signals a strong policy response to any indication that US inflation is moving further away from the Fed's target.
His support for at least a quarter-point increase even under more favorable inflation conditions further reinforces the possibility of additional tightening.
Waller also emphasized the broad-based nature of price increases, anticipated further pressure from producer and energy prices, and argued that monetary policy had not yet become sufficiently restrictive.
Together, these remarks strengthen the upside risks for US Treasury yields and short-term interest rates, potentially creating additional headwinds for non-yielding assets such as Gold.
The FXS Fed Sentiment Index also climbed 3.17 points to 145.50, confirming a decisive shift further into hawkish territory, consistent with Waller's elevated Speechtracker score.
With the index standing well above its neutral threshold of 100, markets may increasingly price in a higher probability of additional Federal Reserve tightening. This could support the US Dollar against lower-yielding currencies while keeping Gold prices under pressure.
