Gold prices remained under bearish pressure below the US$4,150 level during the early European session, with sellers targeting the two-month low near US$4,100 touched the previous day. The US Dollar attracted fresh buying interest after Tuesday’s corrective decline, emerging as the key factor weighing on Gold prices as traders await the Federal Reserve’s FOMC meeting minutes for fresh policy signals.
The price action seen since the beginning of last week can be classified as a bearish consolidation phase against the backdrop of a decline from August’s monthly swing high. Gold is also trading below the 100-period Simple Moving Average (SMA) and the 61.8% Fibonacci retracement level on the 4-hour chart, reinforcing the bearish technical outlook.
Meanwhile, the Moving Average Convergence Divergence (MACD) remains in positive territory at 3.35, suggesting moderate bullish momentum. However, the Relative Strength Index (RSI) stands at 44.26 and is edging lower, indicating that any recovery remains vulnerable while Gold prices stay below the key resistance levels.
Nevertheless, traders may want to wait for a decisive break and sustained acceptance below US$4,100 before anticipating another leg lower. The level represents both the lower boundary of the current trading range and the 78.6% Fibonacci retracement. A sustained decline below this area could expose the next major structural support near US$3,938.
On the upside, immediate resistance is located at the 61.8% Fibonacci retracement near US$4,228, followed by the 100-period SMA at US$4,248 and the 50% Fibonacci retracement at US$4,317. A sustained move above this cluster of resistance levels would be required to ease the current bearish bias.
Fed Rate-Hike Expectations Shift Toward December
US macroeconomic data released last week showed easing inflation and some cooling in the labor market, reducing pressure on the Federal Reserve to raise interest rates. However, the CME Group FedWatch Tool indicates that traders are pricing in roughly an 85% probability of a rate hike by the US central bank in December.
As a result, the upcoming FOMC minutes will be closely watched for clues about the Federal Reserve’s future interest-rate path and monetary policy outlook. Any indication of further rate hikes could have a significant impact on the US Dollar and non-yielding Gold.
Strategists at BNY Markets emphasized that the market repricing away from a Federal Reserve move in October does not necessarily signal a material shift in the central bank’s near-term policy trajectory. They noted that the probability of a December rate hike has not declined significantly and now expect a second rate increase in the current cycle to take place toward the end of the year.
Looking further ahead to 2027, BNY Markets warned that the outlook has become increasingly uncertain, particularly because the ongoing conflict in the Middle East remains difficult to predict. Developments in the region could have significant implications for oil prices and create supply-side inflationary pressures.
Geopolitical Risks Support Dollar
Ahead of the FOMC minutes, persistent geopolitical uncertainty and renewed gains in US Treasury yields have helped revive demand for the US Dollar as a safe-haven asset.
In the latest developments surrounding the Middle East crisis, Yemen’s internationally recognized government forces, backed by Saudi Arabia, claimed control of strategic positions along the Red Sea coast, including areas near the Bab al-Mandeb Strait. Meanwhile, Iran-backed Houthi forces responded by targeting key locations in Saudi Arabia, including an Aramco refinery in Riyadh.
Iran has also intensified its attacks around the Strait of Hormuz over the past week, helping crude oil prices extend their recovery from a one-month low reached overnight. Rising energy prices have fueled concerns over inflationary pressures, keeping US Treasury yields elevated near multi-year highs.
Higher yields and renewed demand for the US Dollar have created additional headwinds for XAU/USD, putting further pressure on Gold prices.
At the same time, China’s central bank continued its gold-buying streak for the 23rd consecutive month. However, the ongoing purchases have provided only limited support for Gold amid the broader bearish fundamental backdrop.