Gold reclaims $3,900 after rebounding from YTD low; Fed hike bets and bullish USD set to limit gains

• Following the USD’s sharp advance to a 19-month high, a pause in its rally draws some buyers to Gold on Friday.
• Further USD declines and bullion gains could be constrained by Fed rate-rise expectations and geopolitical risks.
• Positioning for substantial gains also calls for caution given the technical picture.

A move back above $3,900 puts Gold (XAU/USD) on course to end a three-day losing run during Friday’s Asian session. The decline had taken prices to their lowest since late September on the previous day. Supporting the metal is a pause in the US Dollar’s (USD) strong three-day advance, which carried it to its highest since April 2025. Nevertheless, mounting expectations of a US Federal Reserve (Fed) rate rise and uncertainty in the Middle East could sustain support for the Greenback, limiting the scope for a substantial recovery in the precious metal.

US consumer inflation for October exceeded expectations, while hawkish remarks from several Federal Reserve (Fed) officials encouraged traders to price in tighter monetary policy. According to CME Group’s FedWatch Tool, markets have fully priced in a December rate increase of 25 basis points (bps), with roughly a 13% probability assigned to a larger 50-bps rise. Together with the overnight increase in crude oil prices, these developments prolonged the sell-off in US Treasuries. The benchmark 10-year government bond yield consequently climbed further above 5%, supporting USD bulls.

In a renewed warning to Iran on Thursday, US President Donald Trump said those behind any attack on American officials would no longer exist. He also said he would not hesitate to take further military action should circumstances warrant it. In a Truth Social post, Trump added that the US does not need a deal with Iran and that those days have long since passed. Meanwhile, attacks targeting Saudi Arabia’s energy infrastructure and commercial vessels in the Strait of Hormuz continue to underpin the geopolitical risk premium. That reinforces the positive outlook for the USD and should restrict gains in the Gold price.

Friday’s economic calendar is led by the US Producer Price Index (PPI), while speeches by influential FOMC members will help shape expectations for the Fed’s policy trajectory. Geopolitical developments could also continue to generate volatility across global financial markets and drive demand for the USD, giving the commodity some impetus. Even so, XAU/USD is still heading for a weekly loss. With fundamentals appearing firmly supportive of USD bulls, any further advance in gold prices is more likely to attract selling and remain limited.

XAU/USD on the 4-hour chart

Technical Indicators Keep XAU/USD Under Pressure

Repeated recent rejections around horizontal resistance at $4,150, followed by a break beneath the 100-period Exponential Moving Average (EMA) on the 4-hour chart, leave XAU/USD with a bearish near-term bias. Momentum readings also remain subdued: the Relative Strength Index (RSI) is close to oversold territory at 35.43, while the Moving Average Convergence Divergence (MACD) remains below zero, with its line at around -15.22. Despite tentative signs of exhaustion, these signals suggest that selling pressure continues to dominate.

Initial resistance to a further advance may emerge around $3,960, followed by the psychological $4,000 level and the 100-period EMA at $4,037.06. Only a sustained recovery beyond this barrier would ease the prevailing bearish picture and pave the way for a broader corrective rebound towards the round $4,100 level, then the $4,150 hurdle. Below current prices, the $3,865-$3,855 zone, which marks the year-to-date low, could provide an interim area of demand. A break beneath it would set up a continuation of the established downtrend from August’s swing high.

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