$3,900 reclaimed: Gold rebounds from YTD low; Fed hike bets and USD strength to limit gains

A 19-month USD peak gives way to a pause. Gold draws some buying interest on Friday after the dollar's sharp advance.
Further USD declines could be contained by Fed rate hike expectations and geopolitical risk, restricting bullion's upside.
Caution is also warranted by the technical picture before taking positions for substantial gains.

Gold (XAU/USD) regains $3,900 in Friday's Asian session. The modest advance ends a three-day losing streak after the metal hit its lowest level since late September on the previous day. Support comes from a pause in the US Dollar (USD), following a sharp three-day climb to its highest level since April 2025. Yet growing expectations of a US Federal Reserve (Fed) rate hike, alongside uncertainty in the Middle East, could keep the Greenback supported. Any significant recovery in the precious metal should therefore remain constrained.

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

Traders have priced in a tighter monetary policy stance after several Federal Reserve (Fed) officials delivered hawkish comments following stronger-than-expected US consumer inflation figures for October. A December rate hike of 25 basis points (bps) is now fully priced in, according to the CME Group's FedWatch Tool. Traders also put the probability of a jumbo 50-bps increase at around 13%. Together with an overnight rise in crude oil prices, these expectations prolonged the sell-off in US Treasuries. The benchmark 10-year government bond yield moved further above 5%, reinforcing support for USD bulls.

A renewed warning to Iran came from US President Donald Trump on Thursday. He said those responsible for any attack on American officials would no longer exist, and added that he would not hesitate to take further military action if warranted. In a Truth Social post, Trump also wrote that the US does not need a deal with Iran, saying those days have long since passed. Meanwhile, attacks on Saudi Arabia's energy infrastructure and commercial vessels in the Strait of Hormuz sustain the geopolitical risk premium. This supports the positive USD outlook and should limit 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. New geopolitical headlines could also keep global financial markets volatile 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, subsequent advances in gold are more likely to attract selling and remain limited.

4-hour XAU/USD chart

Technical Outlook

Repeated recent rejections near 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 remains subdued: the Relative Strength Index (RSI) is close to the oversold band at 35.43, while the Moving Average Convergence Divergence (MACD) remains negative, with its line around -15.22. Despite initial signs of exhaustion, selling pressure therefore still appears dominant.

An extension of the rebound 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 recovery beyond this barrier would alleviate the bearish technical picture and clear a path for a wider corrective rebound towards the round $4,100 level, then the $4,150 barrier. Below current prices, the $3,865-$3,855 zone, representing the year-to-date low, could provide an interim area of demand. A break there 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. Know more.)

Federal Reserve FAQs

The Federal Reserve's role and its influence on the US Dollar

Two mandates guide the Federal Reserve (Fed) in setting US monetary policy: price stability and full employment. Adjusting interest rates is 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. Borrowing becomes more expensive across the economy, while the US becomes a more attractive destination for international capital. This strengthens 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, putting pressure on the Greenback.

Eight meetings a year: the Fed's policy schedule

At eight policy meetings each year, the Federal Open Market Committee (FOMC) reviews economic conditions and decides monetary policy for the Federal Reserve (Fed). Twelve Fed officials attend: 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. The latter serve rotating one-year terms.

Quantitative Easing (QE): the implications for USD

When financial conditions become extreme, the Federal Reserve may turn to Quantitative Easing (QE) to substantially expand the supply of credit in a stalled financial system. This unconventional policy is deployed during crises or periods of extremely low inflation. During the Great Financial Crisis in 2008, it was the Fed’s preferred response. Under QE, the Fed prints additional Dollars to purchase high-grade bonds from financial institutions. The US Dollar typically weakens as a result.

Quantitative Tightening (QT): the implications for the US Dollar

The reverse of QE is Quantitative tightening (QT). Under this process, the Federal Reserve ceases bond purchases from financial institutions and does not use principal repaid on its maturing bond holdings to buy new bonds. This generally supports the US Dollar's value.