Below $4,000: Gold under pressure as Fed hike bets and Mideast risks drive USD to new YTD high

Gold heads lower for a third consecutive day. USD buying following the US CPI release shows no sign of easing.
April 2025 highs are reached by the safe-haven USD as Fed rate rise expectations strengthen and Middle East risks persist.
Further downside appears to remain the easier course for XAU/USD given the prevailing backdrop.

Gold (XAU/USD) trades below $4,000. Selling pressure has persisted for a third consecutive day, leaving the metal beneath this psychological threshold during the Asian session and close to the low of more than one week recorded earlier this Thursday. Meanwhile, the US Dollar (USD) is building on its rally following strong US consumer inflation data. Growing expectations of a Federal Reserve (Fed) rate rise and uncertainty in the Middle East are supporting the currency, which is seen as a key source of pressure on gold.

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

Prospects for additional Fed tightening strengthened after this week's release of the October US Consumer Price Index (CPI) report. Hawkish remarks from several influential FOMC members subsequently reinforced expectations that the US central bank would lift borrowing costs again in December. Markets have also begun to price in the possibility of a larger 50-basis-point (bps) increase next month. Against this backdrop, the benchmark 10-year US government bond yield climbed back above 5% on Wednesday, providing continued support for the Greenback.

December rate rise bets strengthen as Fed political-pressure concerns recede

For Rabobank analysts, the reaction to recent hawkish comments by Fed officials extends beyond an immediate adjustment to the expected policy path. The signals, “including those from Waller that put the risk of a 50-bps rate hike on the table,” have left the market “fully priced for a December rate hike,” they note. Importantly, the remarks were “met with no real speculation that the Fed would be pressured by political forces not to raise rates.”

The analysts also observe that “since Fed Chair Warsh surprised the market with a hawkish position at Jackson Hole in August, fears about diminished Fed credibility have dissipated.” Their assessment is 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.

Geopolitical risk premiums also persist as the US and Iran remain locked in a standoff over the Strait of Hormuz. Both countries have struck islands in the waterway in recent days. US forces reportedly launched a series of attacks on 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 order of the leader of the revolution.

Together, these developments have taken the USD Index (DXY), which measures the Greenback against a basket of currencies, to its strongest level since April 2025, supporting the case for further advances. The implications for gold remain negative: further losses appear to be the easier course, with recovery attempts more likely to attract selling. Attention now turns to the regular US Weekly Initial Jobless Claims release and remarks from Fed officials. Fresh geopolitical developments could also trigger volatility and give further impetus to the dollar and XAU/USD.

1-hour chart: XAU/USD

Technical Outlook

Rejection near the 100-hour Exponential Moving Average (EMA) at $4,044 on the previous day leaves gold's near-term outlook bearish. The ensuing break beneath the 50.0% retracement, followed by sustained trading below the psychological $4,000 threshold, reinforces that bias. Momentum signals, however, are less uniformly negative. The Moving Average Convergence Divergence (MACD) indicator has edged into positive territory, while the Relative Strength Index (RSI) sits near 31 after only a modest recovery from oversold levels. These readings suggest stabilisation rather than a clear upward reversal, with a cluster of overhead resistance still limiting gold.

The nearest support lies at $3,976, the 61.8% retracement. Below that, Fibonacci support levels stand at $3,930 (78.6%) and $3,870 (100%). Should the pullback deepen, buyers could try to defend the broader uptrend at those levels. Initial resistance on a recovery is at $4,009, the 50.0% retracement. A more substantial barrier follows around the 38.2% retracement at $4,041, alongside the 100-period EMA at $4,044. A sustained move above the latter would clear a route towards the 23.6% retracement at $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.)

Fed: Key Questions

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

The Federal Reserve (Fed) sets US monetary policy with two objectives: stable prices and full employment. Adjustments to interest rates are its main means of pursuing these goals. If prices rise too rapidly and inflation exceeds the Fed’s 2% target, the central bank increases rates. Borrowing then becomes more expensive across the economy. Higher rates make the US more attractive to international investors allocating capital, strengthening the US Dollar (USD). Conversely, inflation below 2% or an excessively high Unemployment Rate may prompt the Fed to cut rates. This encourages borrowing but puts pressure on the Greenback.

Eight meetings a year: how does the Fed decide policy?

Eight times a year, the Federal Reserve (Fed) convenes policy meetings at which the Federal Open Market Committee (FOMC) reviews economic conditions and decides 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 presidents drawn from the remaining eleven regional Reserve Banks. The latter four serve rotating one-year terms.

Quantitative Easing (QE): what does it mean for USD?

When conditions become extreme, the Federal Reserve may turn to Quantitative Easing (QE), a policy designed to substantially expand credit flows through a stalled financial system. This unconventional measure is deployed during crises or periods of exceptionally 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 policy typically weakens the US Dollar.

Quantitative Tightening (QT): how does it affect the US Dollar?

By reversing QE, quantitative tightening (QT) generally supports the US Dollar's value. Under QT, the Federal Reserve ceases bond purchases from financial institutions. It also refrains from reinvesting principal repaid on maturing bond holdings in new bonds.