Gold edges down as USD draws support from Fed rate hike bets and Middle East tensions

• Renewed buying of USD on dips puts Gold under fresh selling pressure on Thursday.
• Demand for the safe-haven dollar returns as hawkish Fed expectations combine with geopolitical risks.
• The US Q3 GDP release and the key PCE Price Index are next in focus for traders seeking direction.

Below $4,050 in Thursday’s Asian session, Gold (XAU/USD) faces renewed selling after a three-day advance took it to a weekly high on Wednesday. A recovery in the US Dollar (USD) is a key source of pressure on the precious metal, bringing that winning streak to an end. The dollar has regained ground following Wednesday’s post-FOMC correction from a two-week high.

A 10-2 vote at the October policy meeting left US Federal Reserve (Fed) interest rates unchanged, as widely anticipated. Governor Lisa Cook and Cleveland Fed President Beth Hammack instead favoured a quarter-point increase. At the subsequent press conference, Fed Chair Kevin Warsh signalled that persistent inflation and geopolitical risks remain under close scrutiny at the central bank. Together with concerns over energy-led price pressures, this supports expectations of additional Fed tightening. Traders now price in around an 80% probability of an increase in borrowing costs at the December policy meeting, according to the CME Group’s FedWatch Tool. That hawkish outlook is drawing demand back to the USD and helping divert flows away from non-yielding Gold.

The dollar’s safe-haven appeal is also benefiting from fears that Middle East tensions could intensify. According to a Tuesday report in The Wall Street Journal, US officials have advised several Gulf Arab countries to prepare for a brief but intense military campaign against Iran following the November 3 midterm elections. Iranian Foreign Minister Abbas Araghchi, by contrast, said the armed forces were ready to defend the country, while Tehran would maintain close contact with intermediaries to allow diplomacy a chance. Regional mediators, led by Qatar, are seeking to restart US-Iran negotiations and prevent a resumption of the war. In a separate reported attempt to revive peace talks, US Vice President JD Vance sent a letter to Mohsen Rezaei, secretary of Iran’s Supreme National Security Council.

Geopolitical risks nevertheless persist, with fierce fighting continuing in Yemen between the Iran-backed Houthi group and the Saudi Arabia-backed government. On Tuesday, the Houthis said they had targeted Ras Tanura, Saudi Arabia’s largest oil refinery, with a ballistic missile. Earlier this week, attacks on pumping stations along Saudi Arabia’s East-West oil pipeline also fuelled concerns about supply disruption, lending support to crude oil prices. These developments favour USD bulls and suggest Gold prices still face a path of least resistance to the downside. However, traders may hold off on aggressive positions until the release of key US economic data: the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index.

XAU/USD on the 4-hour chart

Gold Retains a Bearish Technical Bias

A descending channel has guided XAU/USD lower over roughly the past month. With the pair trading beneath the 100-period Exponential Moving Average (EMA) on the 4-hour chart, its near-term bias remains bearish. The Moving Average Convergence Divergence (MACD), however, has moved into positive territory, while the Relative Strength Index (RSI) sits near neutral at around 47.5. Although momentum indicators have improved, they suggest only a corrective rebound within the broader downward trend outlined by the channel.

An attempted rebound is therefore more likely to encounter its first resistance at the 100-period EMA, near $4,105. Beyond that, the channel’s upper boundary around $4,125 presents a firmer hurdle where sellers could return. Should prices fall, the psychological $4,000 level could provide the next significant support, followed by the descending parallel channel’s lower boundary at around $3,946. A clear break below that boundary would strengthen the existing bearish structure and leave scope for further losses over the coming sessions.

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