Gold prices maintained a mildly positive bias on Tuesday but remained capped below the $4,200 level and the upper boundary of a two-week trading range. The US Dollar (USD) retreated from its highest level since April 2025 amid some profit-taking, providing modest support for the precious metal. However, the Federal Reserve’s (Fed) hawkish policy stance and escalating Middle East tensions could limit deeper losses in the safe-haven Dollar, keeping Gold prices under pressure and warranting caution among aggressive bullish traders.
The XAU/USD pair remained confined within a two-week trading range, extending its bearish consolidation following the decline from the August monthly swing high. Furthermore, Gold continued to trade below the 100-period Simple Moving Average (SMA) on the four-hour chart, reinforcing the negative short-term outlook.
The Moving Average Convergence Divergence (MACD) indicator remained slightly in negative territory, suggesting that bullish momentum was losing strength. Meanwhile, the Relative Strength Index (RSI) hovered near 55, indicating a constructive but gradually cooling bullish tone as Gold consolidated below a key resistance barrier.
Consequently, further upside could encounter initial resistance near the 100-period SMA at $4,204. This is followed by the upper boundary of the trading range around $4,218, while the 61.8% Fibonacci retracement level at $4,241 represents the next significant hurdle.
Beyond these levels, a broader supply zone could emerge between the 50.0% Fibonacci retracement at $4,328 and the 38.2% level at $4,415. Additional resistance lies at the 23.6% retracement level of $4,523, followed by the cycle peak near $4,697.
On the downside, immediate support aligns with the 78.6% Fibonacci retracement level at $4,117. A decisive break below this level could trigger renewed selling pressure, exposing the structural floor around the previous swing low of $3,959.
Hawkish Fed Expectations Support the US Dollar
Minutes from the Federal Open Market Committee (FOMC) meeting held on September 15–16, released last Wednesday, revealed that policymakers considered another quarter-point interest rate increase before the end of 2026 potentially appropriate, as inflation remained above the Fed’s 2% target.
Additionally, hawkish comments from Cleveland Fed President Beth Hammack on Monday reinforced market expectations that the US central bank could raise borrowing costs toward the end of the year. Energy-driven inflation risks have also strengthened the prospect of further monetary tightening, keeping US Treasury yields elevated near multi-year highs.
Hammack’s Hawkish Stance Reinforces Inflation Concerns
Fed official Beth Hammack delivered a notably hawkish message, receiving an FXS Speechtracker score of 8.4 out of 10, well above the historical average of 7.5. The reading highlighted a stronger-than-usual preference for tighter monetary policy.
Her emphasis on maintaining higher interest rates, preserving restrictive financial conditions to bring inflation back to 2%, and preventing inflation expectations from becoming entrenched reinforced the prospect of further tightening.
Hammack also expressed concern that inflationary pressures were becoming more persistent amid broadly neutral financial conditions and demand-driven price pressures, including those associated with artificial intelligence (AI).
Her remarks suggested a preference for relatively prompt and smaller interest rate adjustments, keeping the policy outlook tilted firmly toward further tightening. Such expectations typically provide support for the US Dollar.
Hammack’s focus on explaining the Fed’s policy reaction function, alongside warnings that companies were planning price increases beyond rising costs, reinforced the message that the current inflation trend in the mid-to-upper 2% range remained inconsistent with the central bank’s target.
The FXS Fed Sentiment Index subsequently increased by 0.59 points to 138.92, confirming that Fed communication remained firmly within hawkish territory. The reading stood well above the neutral threshold of 100, indicating that recent central bank commentary was increasingly aligned with expectations for tighter monetary policy.
This policy outlook generally supports the US Dollar against other major currencies and could limit Gold’s recovery, particularly as the precious metal offers no interest income.
Middle East Tensions Limit Gold’s Upside
Meanwhile, Iran-backed Houthi forces in Yemen intensified their campaign against Saudi Arabia, launching additional missiles on Monday. The escalation followed a deadly attack at Riyadh’s King Khalid International Airport over the weekend, prompting Saudi Arabia to threaten retaliation.
US President Donald Trump also raised the possibility of joining military operations against the Houthis and resuming attacks on Iran.
These developments have kept geopolitical risk premiums elevated, supporting demand for the US Dollar as a safe-haven asset. As a result, the geopolitical backdrop could restrict meaningful gains in Gold prices, despite the precious metal’s traditional appeal during periods of uncertainty.
Traders may also prefer to wait for further clarity on the Fed’s monetary policy outlook before establishing fresh directional positions.
Attention is therefore shifting toward the latest US inflation data, with the Consumer Price Index (CPI) scheduled for release on Wednesday and the Producer Price Index (PPI) due on Thursday.
Additionally, Fed Chair Kevin Warsh’s speech at the annual meetings of the International Monetary Fund (IMF) and World Bank in Bangkok on Friday could influence the US Dollar and non-yielding Gold.
Overall, the fundamental backdrop suggests that further Gold advances could attract selling interest, potentially keeping XAU/USD gains limited in the near term.
US CPI Key to Fed Rate Expectations
Analysts at Societe Generale highlighted that the main non-geopolitical event this week would be Wednesday’s US CPI release, describing it as a crucial factor in shaping near-term market expectations for the Federal Reserve.
The analysts noted that an increase in core inflation to 2.5%, in line with market consensus, could leave existing rate expectations largely unchanged.
Under this scenario, a rate increase at the current month’s meeting would remain unlikely, while the probability of a December hike and another increase in the first quarter would remain significant.
Consequently, the upcoming inflation figures could play a decisive role in determining the US Dollar’s next move and whether Gold can break above its current consolidation range or faces renewed selling pressure.