Can gold extend its rebound from the YTD low beyond $3,900 as Fed hike bets limit gains?

• Buying interest returns to Gold on Monday, with hopes of diplomacy over Iran weighing on the safe-haven USD.
• Optimism remains restrained as Ukraine strikes Russia and the US threatens additional military action.
• Expectations of a Fed rate hike cushion the USD’s decline and constrain the commodity before this week’s US economic releases.

Buying interest lifts Gold (XAU/USD) at the start of the week, ending a two-day decline and recouping some of Friday’s steep losses, which had taken it below $3,900 to its lowest level since October 2025. Hopes of a diplomatic breakthrough to bring the US-Iran war to an end are restraining the safe-haven US Dollar (USD), lending the commodity some support. However, oil-led inflation worries continue to underpin expectations of a US Federal Reserve (Fed) rate hike, which could weigh on the non-yielding yellow metal.

Efforts to secure an agreement ending the US-Israeli war on Iran reportedly continued on Sunday, when Iranian negotiators met Qatari mediators for a third consecutive day. Iran has also put forward a two-day (48-hour) proposal to reopen the Strait of Hormuz, conditional on the US meeting several demands. These include removing sanctions imposed after the Islamabad memorandum and scaling back US forces in the region. US President Donald Trump added to the optimism, saying that talks with Iran were progressing well and that Iran wanted an agreement.

Further military action after the November 3 midterm elections remains an option, however, according to Trump. Meanwhile, Iran’s Supreme Leader, Mojtaba Khamenei, instructed his senior military commanders to ready themselves for another confrontation with the US and Israel and broaden Tehran’s retaliatory options. Together with renewed Ukrainian strikes on Russian oil refineries, these developments sustain the geopolitical risk premium and leave USD bears on the defensive. This calls for caution before positioning for additional gains in the Gold price.

Expectations of further Fed tightening were reinforced by US economic data published last Thursday, which showed resilient growth alongside persistent price pressures. Traders now assign around a 75% probability to another increase in borrowing costs by the US central bank in December, according to the CME Group’s FedWatch Tool. With attention turning to key US economic releases due at the beginning of a new month, a sustained wave of buying is therefore required to confirm a near-term bottom in XAU/USD.

Later today brings the US ISM Manufacturing PMI, while Wednesday’s ISM Services PMI precedes Friday’s closely tracked monthly US employment figures, commonly called the Nonfarm Payrolls (NFP) report. Until then, the fundamental backdrop outlined above indicates that further recovery attempts are more likely to encounter selling and remain limited.

XAG/USD: The 4-hour chart

Technical Analysis: Can Gold Ease Its Bearish Bias?

Bearish traders took a key cue from Friday’s break below the psychological $4,000 level and the price’s subsequent acceptance beneath it. The near-term negative view is further supported by the precious metal trading well under its 100-period Exponential Moving Average (EMA) on the 4-hour chart. Negative territory still contains the Moving Average Convergence Divergence (MACD), with its line below the signal line and its histogram weak. At the same time, an oversold Relative Strength Index (RSI) reading of 28.94 suggests that, despite prevailing downside pressure, the latest decline may be overstretched in the short term.

Fresh selling is nevertheless likely to meet any further advance, limiting it near the 100-period EMA at $4,068.55. Bulls would need to recover this key level to moderate the prevailing bearish bias. Should prices fall, traders will watch the area around Friday’s swing low of $3,870 for potential demand. A break below that region should open the door to a continuation of the firmly established downtrend.

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