Gold bears await break below $4,100 as oil fuels Fed hike bets and USD edges higher

• A combination of adverse factors keeps Gold under pressure for a fourth consecutive day.
• Inflation concerns linked to oil strengthen expectations of a December rate rise, weighing on non-yielding bullion.
• Hopes for diplomacy with Iran restrain the USD and help contain the precious metal’s losses.

Inflation risks arising from oil price volatility support expectations of further monetary tightening by the US Federal Reserve (Fed), as Gold (XAU/USD) falls to a new weekly low in Wednesday’s Asian session. Bears, however, are waiting for a sustained break below $4,100 and evidence that prices can hold beneath that level before positioning for additional declines. Bullion is also facing pressure from a modest recovery in the US Dollar (USD), which reached a near three-week low on Tuesday.

Renewed optimism over US-Iran peace talks prompted a sharp intraday reversal in crude oil on Tuesday, after prices had reached their highest level in more than a month. An unconfirmed report suggested that Qatar and Pakistan had presented the US and Iran with a compromise plan addressing both sides’ demands. That optimism was subsequently challenged: Bloomberg reported that a diplomat involved in the US-Iran negotiations disputed reports of an imminent agreement. According to state media, Iranian Parliament Speaker Mohammad Bagher Ghalibaf also told Pakistan’s Army Chief, Asim Munir, that the US would need to fulfil previously stated conditions before it could gain Iran’s trust. Those conditions included ending all hostilities and unfreezing the country’s assets, dampening expectations of an early breakthrough.

Concerns about crude supply disruption intensified after Iran’s First Vice President said the country had no alternative but to exercise sovereignty over the Strait of Hormuz, helping oil prices recover swiftly from their weekly low. Alongside last week’s elevated US inflation readings, this reinforces market expectations of an imminent Fed rate rise. The CME Group’s FedWatch Tool shows traders assigning a probability of over 90% to another increase in US borrowing costs in December. Meanwhile, uncertainty over the Middle East crisis lends some support to the safe-haven US Dollar. This adds to the pressure on Gold for a fourth consecutive day and strengthens the argument for further declines.

Even so, investors may hold back from taking sizeable directional positions until the Fed’s policy outlook becomes clearer. Attention therefore centres on the conclusion of the two-day FOMC policy meeting on 28 October, followed on 29 October by the US Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred measure of inflation. Next week’s monetary policy announcements from the Reserve Bank of New Zealand (RBNZ), the Bank of Canada (BoC), the European Central Bank (ECB) and the Bank of Japan (BoJ) should also give non-yielding Gold a meaningful impetus. The wider fundamental picture nevertheless remains favourable to XAU/USD bears, suggesting that prices still face less resistance on the downside.

XAU/USD on the 4-hour chart

Technical indicators support the bearish outlook

The bearish outlook is reinforced by the overnight failure to move above the 100-period Exponential Moving Average (EMA) on the 4-hour chart, followed by a renewed decline. Momentum indicators offer further support for that view: the Moving Average Convergence Divergence (MACD) remains below zero at -4.65, while the Relative Strength Index (RSI), at 39.16, points to weak momentum without yet indicating oversold conditions. A move below $4,100 would confirm the bearish bias and bring the monthly swing low near $4,066 into focus.

Further selling would leave Gold exposed to an accelerated decline towards the psychological $4,000 level, followed by the year-to-date low in the $3,943-$3,942 region recorded in June. Any recovery, meanwhile, could encounter strong initial resistance at the 100-period EMA, near $4,175. Only a sustained move above that barrier would ease the prevailing bearish tone and pave the way for a more substantial recovery.

(The technical analysis of this story was written with the help of an AI tool. Learn more.)