Gold reclaims $3,900 after recovering from YTD low; will Fed hike bets and bullish USD limit gains?

Buying interest returns to Gold on Friday, with the USD taking a breather following a sharp advance to a 19-month high.
Further USD declines could be contained by Fed rate hike expectations and geopolitical risks, restricting bullion’s gains.
Caution is also warranted by the technical picture before taking positions for a substantial advance.

Buying interest lifts Gold (XAU/USD) back above $3,900 during Friday’s Asian session, ending a three-day decline that took prices to their lowest since late September on the previous day. Support for the metal comes as the US Dollar (USD) pauses following a sharp three-day advance to its strongest level since April 2025. Even so, growing expectations of a US Federal Reserve (Fed) rate hike and uncertainty in the Middle East could sustain support for the Greenback, keeping any substantial recovery in the precious metal in check.

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

Traders have priced in a tighter monetary policy stance after hawkish remarks from several Federal Reserve (Fed) officials followed stronger-than-expected US consumer inflation data for October. According to the CME Group’s FedWatch Tool, a December rate increase of 25 basis points (bps) is now fully priced in, while the probability assigned to a larger 50-bps hike stands at around 13%. Together with the overnight rise 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.

Geopolitical tensions also remain in focus. In a fresh warning to Iran on Thursday, US President Donald Trump said those behind any attack on American officials would no longer exist and that he would not hesitate to take further military action if warranted. In a Truth Social post, Trump also said the US did not need a deal with Iran, adding that those days had long since passed. Meanwhile, attacks on Saudi Arabia’s energy infrastructure and commercial vessels in the Strait of Hormuz are sustaining the geopolitical risk premium. This reinforces the positive outlook for the USD and should limit gains in Gold.

Friday’s economic calendar is led by the US Producer Price Index (PPI), while remarks from influential FOMC members will shape expectations for the Fed’s policy trajectory. Fresh geopolitical developments could also keep global financial markets volatile and influence the commodity by driving USD demand. Despite the rebound, XAU/USD is still heading for a weekly loss. With the fundamental backdrop appearing firmly supportive of USD bulls, any further rise in gold prices is more likely to encounter selling and remain limited.

XAU/USD: 4-hour price chart

Can XAU/USD Overcome Its Bearish Technical Setup?

Repeated recent rejections around horizontal resistance at $4,150, followed by a break below the 100-period Exponential Moving Average (EMA) on the 4-hour chart, leave XAU/USD with a bearish near-term outlook. Weak momentum reinforces that picture: the Relative Strength Index (RSI) is close to the oversold zone at 35.43, while the Moving Average Convergence Divergence (MACD) remains negative, with its line around -15.22. Although early signs of exhaustion are emerging, these readings suggest that selling pressure continues to dominate.

An extension of the recovery could first encounter resistance around $3,960, followed by the psychological $4,000 level and the 100-period EMA at $4,037.06. Only a sustained move above this barrier would ease the prevailing bearish structure and allow a broader corrective rebound towards the round figure of $4,100, followed by the $4,150 hurdle. On the downside, interim buying demand could emerge in the $3,865-$3,855 zone, which marks the year-to-date low. A break below that area would pave the way for the established downtrend from the August swing high to extend.

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

Questions About the Fed

How does the Federal Reserve’s role affect the US Dollar?

The Federal Reserve (Fed) sets US monetary policy with a dual mandate of maintaining price stability and promoting full employment. Adjustments to interest rates are its main means of pursuing these objectives. If prices rise too rapidly and inflation exceeds the Fed’s 2% target, the central bank increases interest rates, pushing up borrowing costs across the economy. Higher rates make the US more appealing to international investors seeking somewhere to place their funds, strengthening the US Dollar (USD). Conversely, inflation below 2% or an excessively high Unemployment Rate may prompt the Fed to cut interest rates to stimulate borrowing. Such a move puts pressure on the Greenback.

What is the frequency of the Fed’s monetary policy meetings?

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

How does Quantitative Easing (QE) work, and what does it mean for USD?

When circumstances are extreme, the Federal Reserve may use Quantitative Easing (QE) to significantly expand the supply of credit in a financial system that is not functioning smoothly. This unconventional policy tool is deployed in crises or when inflation is exceptionally low, and was the Fed’s preferred response during the Great Financial Crisis in 2008. Under QE, the Fed prints additional Dollars to purchase high-grade bonds from financial institutions. The US Dollar typically weakens as a result.

How does Quantitative Tightening (QT) work, and what does it mean for the US Dollar?

As the opposite of QE, Quantitative Tightening (QT) involves the Federal Reserve ending bond purchases from financial institutions. It also refrains from using principal repaid on maturing bonds in its holdings to buy new bonds. This process generally supports the value of the US Dollar.