Above $3,900: Gold struggles to extend rebound from YTD low as Fed hike bets limit gains

Gold draws buying interest on Monday. Hopes of diplomatic progress on Iran weigh on the safe-haven USD.
Optimism remains constrained by Ukrainian strikes on Russia and US warnings of further military action.
Ahead of this week’s US economic releases, Fed rate hike expectations also cushion the USD and restrict gold’s upside.

Gold (XAU/USD) fell below $3,900 on Friday, its lowest level since October 2025. It starts the new week higher, ending a two-day decline and recovering some of Friday’s steep losses. Hopes of a diplomatic breakthrough to end the US-Iran war are restraining the safe-haven US Dollar (USD), lending the metal some support. However, concerns over oil-driven inflation continue to underpin expectations of a US Federal Reserve (Fed) rate hike. That prospect could weigh on non-yielding gold.

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

Talks between Iranian negotiators and Qatari mediators reportedly continued on Sunday for a third consecutive day, aimed at securing an agreement to end the US-Israeli war on Iran. Iran has also put forward a two-day (48-hour) plan to reopen the Strait of Hormuz, conditional on the US meeting several demands. These include removing sanctions imposed following the Islamabad memorandum and reducing US forces in the region. US President Donald Trump added to the positive signals, saying negotiations with Iran were progressing well and that Iran wanted an agreement.

Further military action after the November 3 midterm elections remains an option, Trump nevertheless said. Meanwhile, Iran’s Supreme Leader, Mojtaba Khamenei, instructed his senior military commanders to prepare for another confrontation with the US and Israel and broaden Tehran’s retaliation options. Fresh Ukrainian strikes on Russian oil refineries add to these tensions. Together, they sustain the geopolitical risk premium and leave USD sellers on the defensive, suggesting caution before positioning for further gold price gains.

Around a 75% probability of another US interest rate rise in December is currently priced in by traders, according to the CME Group’s FedWatch Tool. Figures released last Thursday showed resilient US economic growth alongside persistent price pressures, reinforcing expectations of further Fed tightening. With attention turning to key US economic releases at the start of a new month, XAU/USD still needs strong follow-through buying to establish that a near-term bottom is in place.

Later today brings the US ISM Manufacturing PMI. The ISM Services PMI follows on Wednesday, before Friday’s closely watched monthly US employment figures, commonly called the Nonfarm Payrolls (NFP) report. Until then, the fundamental backdrop outlined above suggests that further recovery attempts are more likely to face selling and remain limited.

4-hour chart: XAG/USD

$4,000 Break Signals Bearish Bias

A decisive move below the psychological $4,000 level on Friday, followed by acceptance beneath it, was regarded as an important bearish trigger. The metal also remains well under its 100-period Exponential Moving Average (EMA) on the 4-hour chart, reinforcing the negative near-term outlook. In negative territory, the Moving Average Convergence Divergence (MACD) shows a weak histogram and a MACD line below its signal line. The Relative Strength Index (RSI), however, stands at 28.94 in oversold territory. This suggests the latest decline may be stretched in the short term, even as downside pressure remains dominant.

Fresh selling is likely to meet any further advance, limiting gains near the 100-period EMA at $4,068.55. Bulls would need to regain that key level to reduce the prevailing bearish bias. For potential demand on the downside, traders are now likely to focus on Friday’s swing low around $3,870. A break below that area should open the way for the established downtrend to extend.

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

Fed: Key Questions Answered

2% Inflation Target: How Does Federal Reserve Policy Affect the US Dollar?

Price stability and full employment form the Federal Reserve’s (Fed) dual mandate. As the institution responsible for US monetary policy, it relies primarily on interest rate adjustments to pursue these objectives. If prices climb too rapidly and inflation exceeds its 2% target, the Fed increases interest rates. Borrowing then becomes more expensive across the economy. Higher rates make the US a more appealing destination for international investment, strengthening the US Dollar (USD). Conversely, inflation below 2% or an excessively high unemployment rate may prompt the Fed to cut interest rates. This encourages borrowing but puts pressure on the US currency.

Eight Meetings a Year: How Does the Fed Set Monetary Policy?

Economic conditions are reviewed and monetary policy decisions taken by the Federal Open Market Committee (FOMC) at the Federal Reserve’s (Fed) eight policy meetings each year. Twelve Fed officials participate: all seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four presidents drawn from the other eleven regional Reserve Banks. Those four serve rotating one-year terms.

Quantitative Easing (QE): How Does It Affect the USD?

A severely impaired financial system may lead the Federal Reserve to adopt Quantitative Easing (QE), a policy designed to increase credit flows substantially. Reserved for crises or exceptionally low inflation, this unconventional measure 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.

Quantitative Tightening (QT): What Does It Mean for the US Dollar?

By reversing QE, quantitative tightening (QT) typically supports the US Dollar’s value. Under QT, the Federal Reserve ceases bond purchases from financial institutions. It also stops using principal repaid on its maturing bond holdings to buy new bonds.