Gold struggles to regain $4,000 as Fed rate hike bets and Mideast risks propel USD to new YTD high

• Following the US CPI release, persistent USD buying keeps Gold on course for a third consecutive daily decline.
• The safe-haven USD reaches its highest level since April 2025 as Fed rate rise expectations strengthen and Middle East risks persist.
• With the prevailing backdrop favouring further losses, XAU/USD continues to face a downward bias.

Stronger-than-expected US consumer inflation figures continue to support the US Dollar (USD), as expectations of a Federal Reserve (Fed) rate rise build and uncertainty in the Middle East persists. Against this backdrop, Gold (XAU/USD) faces a third consecutive day of selling pressure. During the Asian session, the metal trades below the psychological $4,000 level, close to the low of more than one week reached earlier this Thursday. The dollar’s continuing advance is regarded as a key source of pressure on the commodity.

Released earlier this week, the October US Consumer Price Index (CPI) report strengthened the case for additional Fed policy tightening. Markets’ expectations of another increase in borrowing costs in December were reinforced by hawkish remarks from several influential FOMC members. Traders have also begun to price in the possibility of an outsized 50-basis-point (bps) rise next month. On Wednesday, this outlook drove the benchmark 10-year US government bond yield back above 5%, providing continuing support for the dollar.

Hawkish Fed signals reinforce December rate rise bets as political-pressure concerns recede

According to Rabobank analysts, the response to recent hawkish remarks by Fed officials extends beyond an immediate reassessment of the policy outlook, “including those from Waller that put the risk of a 50-bps rate hike on the table,”. They describe the market as now “fully priced for a December rate hike,” while stressing that the remarks were “met with no real speculation that the Fed would be pressured by political forces not to raise rates.”

In Rabobank’s assessment, “since Fed Chair Warsh surprised the market with a hawkish position at Jackson Hole in August, fears about diminished Fed credibility have dissipated.” The analysts also argue that “the results of last week’s midterm elections suggest less reason to expect pressure from the White House,” supporting the view that the Fed can pursue its tightening plans without substantial political interference.

A geopolitical risk premium also persists as the US and Iran remain at odds over the Strait of Hormuz. Both sides have struck islands in the waterway over recent days. US forces reportedly launched a series of strikes against Iran’s Qeshm Island, while Tehran targeted ship navigation systems on the Omani island of Didamar at the entrance to the Persian Gulf. Iranian Armed Forces Deputy Chief of Staff Brigadier General Kioumars Heidari also said Tehran had closed the strategic waterway and would reopen it only on the orders of the leader of the revolution.

Together, these developments have taken the USD Index (DXY), a measure of the dollar against a basket of currencies, to its strongest level since April 2025, supporting the case for further advances. Gold therefore appears more likely to move lower, with any attempted rebound more likely to attract selling. Attention now turns to the regular US Weekly Initial Jobless Claims release and speeches by Fed officials. Fresh geopolitical developments could also generate volatility, giving both the dollar and XAU/USD further impetus.

XAU/USD chart: 1-hour timeframe

Technical Analysis Points to a Bearish Near-Term Bias

Following the previous day’s rejection near the 100-hour Exponential Moving Average (EMA) at $4,044, the precious metal retains a bearish short-term bias. The subsequent break beneath the 50.0% retracement, followed by sustained trading below the psychological $4,000 level, reinforces that outlook. Although the Moving Average Convergence Divergence (MACD) indicator has edged into positive territory, the Relative Strength Index (RSI) remains near 31, having recovered only modestly from oversold territory. Rather than signalling a clear reversal higher, the momentum indicators suggest little more than stabilisation, with a cluster of overhead resistance still limiting gold’s upside.

On the downside, the first support lies at the 61.8% retracement of $3,976. Further Fibonacci support follows at $3,930 (78.6%) and $3,870 (100%), where buyers could seek to protect the broader uptrend should the pullback deepen. Any recovery would initially encounter resistance at the 50.0% retracement of $4,009. Beyond that, a substantial barrier sits around the 38.2% retracement of $4,041, alongside the 100-period EMA at $4,044. A sustained move above the latter would clear a path towards the 23.6% retracement of $4,082, followed by the cycle-high reference point near $4,147.

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