Gold Holds Above $3,900

 

Gold prices maintained modest recovery gains above the $3,900 level during Friday's Asian trading session, halting a three-day losing streak that had pushed the precious metal to its lowest level since late September. A brief pause in the US dollar's strong three-day rally to its highest level since April 2025 provided some support for gold. However, growing expectations of further Federal Reserve (Fed) interest rate hikes and escalating Middle East tensions continued to underpin the Greenback, limiting the upside potential for the precious metal.

The XAU/USD pair maintains a bearish short-term outlook after repeatedly failing to break through the key horizontal resistance around $4,150 and falling below the 100-period Exponential Moving Average (EMA) on the four-hour chart. Momentum indicators also remain weak, with the Relative Strength Index (RSI) hovering near oversold territory at 35.43, while the Moving Average Convergence Divergence (MACD) remains in negative territory around -15.22. These technical signals suggest that downside pressure remains dominant, although early signs of selling exhaustion are beginning to emerge.

On the upside, any further recovery could encounter initial resistance near $3,960, followed by the psychological $4,000 level and the 100-period EMA at $4,037.06. A sustained move above these barriers would be necessary to ease the current bearish outlook and open the door for a broader corrective rebound toward $4,100, followed by the more significant resistance at $4,150.

On the downside, the $3,865-$3,855 region, which represents the current year-to-date low, could provide temporary support. A decisive break below this area would potentially accelerate the established downtrend extending from the August swing high.

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Fed Rate Expectations and Iran Tensions Support the US Dollar

Following hotter-than-expected US consumer inflation data for October, hawkish comments from several Federal Reserve officials have encouraged traders to price in a tighter monetary policy outlook. According to the CME Group's FedWatch Tool, a 25-basis-point (bp) interest rate hike in December is now fully priced in, while traders are assigning approximately a 13% probability to a larger 50-bp increase.

These developments, combined with an overnight rebound in crude oil prices, triggered further selling pressure in US Treasury bonds. As a result, the benchmark 10-year Treasury yield climbed further above the 5% threshold, providing additional support for the US dollar.

Meanwhile, US President Donald Trump issued another warning to Iran on Thursday, stating that those responsible for any attacks against American officials would face severe consequences. Trump also emphasized that he would not hesitate to authorize further military action if circumstances required it.

In a post on Truth Social, Trump added that the United States no longer needed a deal with Iran, suggesting that the opportunity for such an agreement had long passed. Furthermore, attacks targeting Saudi Arabia's energy infrastructure and commercial vessels in the Strait of Hormuz have kept geopolitical risk premiums elevated.

The combination of rising geopolitical uncertainty and expectations of tighter US monetary policy continues to favor the US dollar, potentially limiting further gains in gold prices.

US PPI and Fed Speeches in Focus

Looking ahead, the US Producer Price Index (PPI) for October will be the main economic release on Friday's calendar. Market participants will also closely monitor speeches from influential Federal Open Market Committee (FOMC) members for additional clues about the Federal Reserve's future monetary policy direction.

At the same time, incoming geopolitical developments could continue to generate volatility across global financial markets and strengthen demand for the US dollar, potentially providing another source of pressure on gold.

Despite its modest recovery, the XAU/USD pair remains on track to record a weekly loss. More importantly, the current fundamental environment continues to favor US dollar buyers, suggesting that any additional recovery in gold prices could attract fresh selling interest and remain limited.

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Gold Hits Weekly Low

Gold prices extended their decline for a third consecutive session on Thursday, falling toward the $3,950 level and hitting their lowest point in more than a week. Persistent buying interest in the US Dollar, driven by growing expectations of further Federal Reserve (Fed) interest rate hikes following hotter-than-expected US consumer inflation data, continued to weigh on the precious metal. Meanwhile, escalating uncertainty in the Middle East provided additional support for the safe-haven US Dollar, adding further downside pressure on gold.

The precious metal maintained its short-term bearish bias after facing rejection near the hourly 100-period Exponential Moving Average (EMA) at $4,044 during the previous session. The subsequent decline below the 50.0% Fibonacci retracement level and sustained trading below the psychological $4,000 mark reinforced the negative outlook.

However, the Moving Average Convergence Divergence (MACD) indicator has recently turned slightly positive, while the Relative Strength Index (RSI) is hovering near 31, recovering marginally from oversold territory. These momentum indicators suggest that gold may be attempting to stabilize, although they do not yet signal a convincing bullish reversal. The metal also continues to face several layers of overhead resistance.

On the downside, immediate support is located at the 61.8% Fibonacci retracement level near $3,976, followed by deeper Fibonacci support at $3,930 (78.6%) and $3,870 (100.0%). These levels could attract buyers attempting to defend the broader uptrend if the current correction extends further.

On the upside, initial resistance stands at the 50.0% Fibonacci retracement level around $4,009, followed by a stronger barrier near the 38.2% retracement at $4,041, which aligns with the 100-period EMA at $4,044. A sustained recovery above this resistance zone could open the door toward the 23.6% Fibonacci retracement at $4,082 and the cycle peak near $4,147.

## Hawkish Fed Outlook Fuels December Rate Hike Bets

The US Consumer Price Index (CPI) report for October, released earlier this week, strengthened expectations that the Federal Reserve may pursue further monetary tightening. Hawkish remarks from several influential Federal Open Market Committee (FOMC) officials also reinforced market expectations of another interest rate increase in December.

Furthermore, traders have started pricing in the possibility of a larger 50-basis-point (bp) rate hike next month. These expectations pushed the benchmark US 10-year Treasury yield back above the 5% threshold on Wednesday, providing additional support for the US Dollar.

### Hawkish Fed Signals Strengthen December Rate Hike Expectations

Analysts at Rabobank highlighted that the market reaction to the latest hawkish signals from Fed officials, including comments from Christopher Waller that placed the possibility of a 50-basis-point rate increase on the table, went beyond a simple repricing of the central bank's policy outlook.

According to Rabobank, markets are now fully pricing in a December rate hike. More importantly, the latest hawkish comments have not triggered significant speculation that political pressure could prevent the Federal Reserve from raising interest rates.

Rabobank added that concerns about the Fed's declining credibility have eased since Fed Chair Warsh surprised markets with a hawkish stance at Jackson Hole in August.

The bank also noted that the outcome of last week's US midterm elections provided fewer reasons to expect pressure from the White House, strengthening the perception that the Federal Reserve can continue its monetary tightening plans without significant political interference.

### Middle East Tensions Support Safe-Haven Dollar Demand

Meanwhile, geopolitical risk premiums remain elevated amid the ongoing US-Iran standoff over the Strait of Hormuz. Both sides have reportedly carried out attacks targeting islands along the strategic waterway in recent days.

US forces reportedly conducted a series of strikes against Iran's Qeshm Island, while Tehran targeted maritime navigation systems on Oman's Didamar Island, located near the entrance to the Persian Gulf.

In addition, Iranian Deputy Chief of Staff Brigadier General Kioumars Heidari stated that Tehran had closed the strategic waterway and would not reopen it without an order from the country's Supreme Leader.

These developments have pushed the US Dollar Index (DXY), which measures the Greenback against a basket of major currencies, to its highest level since April 2025, reinforcing the possibility of further gains.

The combination of rising US interest rate expectations, higher Treasury yields, a stronger US Dollar, and escalating geopolitical tensions suggests that the path of least resistance for gold remains to the downside. Any recovery attempts could therefore attract renewed selling pressure.

Market participants are now turning their attention to the latest US Weekly Initial Jobless Claims data and upcoming speeches from Federal Reserve officials. Meanwhile, further geopolitical developments could trigger additional market volatility, potentially providing fresh support for the US Dollar and exerting further pressure on the XAU/USD pair.

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Gold Holds Near $4,050 as Fed Rate Hike Bets Increase

 

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.

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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.

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