$4,000 gives way as gold retreats on Fed rate hike bets despite falling bond yields and weak USD

Near its monthly low, gold extends the previous day’s steep decline.
Fed rate-hike expectations strengthen on oil-related inflation concerns, weighing on the precious metal.
Despite heavy USD pressure from falling US bond yields, bullion finds no support.

Gold (XAU/USD) falls below the $4,000 psychological threshold. Selling extends into a second consecutive day during Friday’s Asian session as expectations for a hawkish US Federal Reserve (Fed) weigh on the metal. Thursday’s US economic releases signalled resilient growth and stubborn price pressures, reinforcing bets on an imminent December rate increase. These expectations are seen as a drag on non-yielding bullion.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

At an annualised 3.4%, preliminary third-quarter US Gross Domestic Product (GDP) growth exceeded the 3.2% consensus forecast and accelerated from 2.2% in the preceding quarter. The US Commerce Department also reported a 0.5% September increase in the Personal Consumption Expenditures (PCE) Price Index, taking its annual rise to 3.6%. Excluding volatile food and energy prices, the core measure increased 0.3% month on month and 3.1% year on year. Alongside inflation concerns linked to elevated US bond yields, these figures support the prospect of further Fed policy tightening.

A rush into safe-haven government bonds sent US Treasury yields sharply lower after weak technology earnings fuelled concerns that growing AI expenditure may generate insufficient returns. Renewed hopes of a diplomatic resolution to Middle East conflicts also pushed the safe-haven US Dollar (USD) down for a third consecutive day. Gold nevertheless remains under bearish pressure. In the latest diplomatic efforts, US Vice President JD Vance sent a letter directly to Mohsen Rezaei, secretary of Iran's Supreme National Security Council, seeking to revive peace talks. Qatar also submitted a new draft agreement to Iran aimed at ending the war with the US and Israel.

Investor caution persists, however, as hostilities intensify between Saudi Arabia and the Iran-backed Houthi group in Yemen. US and Israeli threats to resume attacks after the US midterm elections also sustain the geopolitical risk premium. On Thursday, Iran's navy claimed that four oil tankers had hit sea mines in the Strait of Hormuz, heightening supply disruption concerns and underpinning oil prices. This strengthens the case for renewed USD buying on dips. It also suggests gold’s path of least resistance remains lower, with any rebound likely to attract selling. XAU/USD nonetheless remains on course for a monthly decline of around 3.5%.

4-hour chart: XAU/USD

Technical Outlook

A clearly defined descending parallel channel continues to contain the precious metal’s decline, leaving its near-term bias negative. On the 4-hour chart, trading below the 100-period Exponential Moving Average (EMA) strengthens the bearish structure, with the average expected to provide dynamic resistance above the market. Momentum readings support this assessment: the Relative Strength Index (RSI) is near 35, while the Moving Average Convergence Divergence (MACD) line remains below zero. Selling pressure therefore appears dominant, and nearby resistance is likely to limit rebounds.

A fall through the previous monthly swing low near $3,975 would bring the next significant support into focus at around $3,946, the descending parallel channel’s lower boundary. A clear break below that level would be viewed as a fresh bearish trigger, paving the way for further losses over the coming sessions.

Any rebound would likely meet initial resistance in the $4,025-$4,030 horizontal zone. A move above it could prompt short covering, lifting gold towards the 100-period EMA near $4,093 and then the channel’s upper boundary around $4,126. Together, these levels form a broader supply zone that gold would need to regain to relieve bearish pressure.

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

Federal Reserve FAQs

Federal Reserve: Its Role and Influence on the US Dollar

The Federal Reserve (Fed) sets US monetary policy with two objectives: stable prices and full employment. Interest-rate adjustments are its main means of pursuing these goals. If prices climb too rapidly and inflation exceeds its 2% target, the Fed increases interest rates. Higher borrowing costs across the economy make the US more attractive to international investors, strengthening the US Dollar (USD). By contrast, inflation below 2% or an excessively high Unemployment Rate may prompt the Fed to cut rates to stimulate borrowing. This puts downward pressure on the Greenback.

Eight Meetings a Year: The Fed’s Policy Schedule

At the Federal Reserve’s (Fed) eight annual policy meetings, the Federal Open Market Committee (FOMC) reviews economic conditions and decides monetary policy. Twelve Fed officials participate: all seven Board of Governors members, the Federal Reserve Bank of New York president and four of the other eleven regional Reserve Bank presidents. Those four serve rotating one-year terms.

Quantitative Easing (QE): The Effect on USD

When conditions become extreme, the Federal Reserve may use Quantitative Easing (QE) to substantially expand credit flows through a stalled financial system. This unconventional policy is deployed during crises or periods of extremely low inflation. During the Great Financial Crisis in 2008, it was the Fed’s preferred response. Under QE, the Fed prints additional Dollars to purchase high-grade bonds from financial institutions. The policy generally weakens the US Dollar.

Quantitative Tightening (QT): The Effect on the US Dollar

Reversing QE, quantitative tightening (QT) involves the Federal Reserve halting bond purchases from financial institutions. It also stops reinvesting principal from maturing bond holdings in new bonds. This process generally supports the US Dollar’s value.