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Gold clings to recovery gains above $4,000; upside seems limited ahead of FOMC meeting

FXStreet · 2026-10-26T04:34:22Z
Gold clings to recovery gains above $4,000; upside seems limited ahead of FOMC meeting
  • Gold gains some positive traction, snapping a two-day losing streak to a three-month low.
  • Declining US bond yields cap the attempted USD recovery and lend support to the bullion.
  • XAU/USD bulls seem cautious ahead of this week’s central bank events and the key US data.

Gold (XAU/USD) stages a modest bounce from a three-month low and clings to intraday gains above the $4,000 psychological mark through the first half of Monday’s European session. The precious metal now seems to have snapped a two-day losing streak, though it lacks follow-through buying amid a bearish fundamental backdrop. Despite Federal Reserve (Fed) officials recently signaling no urgency to raise borrowing costs, traders are pricing in an 80% chance of a rate hike by year-end. Furthermore, geopolitical uncertainties underpin demand for the safe-haven US Dollar (USD), which, in turn, is seen as acting as a headwind for the commodity.

S&P Global's flash US Manufacturing Purchasing Managers' Index (PMI) rose to 56 in October, hitting a 53-month high and beating estimates for a reading of 55.6. Meanwhile, the Services PMI matched forecasts and stood at 57.9, compared to 58.8 in September, while the Composite Output Index slipped to 57.6 from a five-year high of 58.4 in the previous month. Additional details revealed that the output price index moved up to 59.8, its highest reading since August 2022, suggesting that inflation could increase further and remain persistently high in the coming months. This comes on top of inflationary concerns stemming from elevated energy prices and underpins prospects for additional Fed tightening, keeping a lid on any meaningful upside for the non-yielding Gold. .

In fact, crude oil prices jumped to the highest level since September 16 amid supply concerns driven by attacks in Saudi Arabia and tensions involving Iran. In the latest developments, the Iran-backed Houthis in Yemen vowed on Sunday that they will keep attacking Saudi Arabia's King Khalid Airport in Riyadh. Moreover, the stalled US-Iran talks keep the geopolitical risk premium firmly in play and help limit deeper losses for the safe-haven Greenback, warranting some caution before placing aggressive bullish bets on gold. Traders might also opt to move to the sidelines ahead of this week's key central bank events and important US macro releases – the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index on Thursday.

The focus, however, will be on the outcome of the two-day FOMC policy meeting on Wednesday. In the absence of updated economic projections, traders will closely scrutinize the accompanying rate statement and Fed Chair Kevin Warsh's comments during the post-meeting press conference for more cues on the future policy path, which will influence the near-term USD price dynamics. Meanwhile, the Reserve Bank of New Zealand (RBNZ), the European Central Bank (ECB) and the Bank of Japan (BoJ) are also scheduled to announce their rate decisions this week. This might further infuse volatility around the Gold price. Nevertheless, the aforementioned fundamental backdrop warrants some caution before confirming that the XAU/USD pair has bottomed out.

XAU/USD 4-hour chart

Chart Analysis XAU/USD

Technical Analysis

The precious metal maintains a bearish near-term tone following last week's breakdown through a short-term trading range support near the $4,100 mark. Moreover, the recent repeated failures to conquer the 100-period Exponential Moving Average (EMA) validate the negative outlook, suggesting that the attempted recovery remains corrective within a broader downside bias.

Hence, any subsequent move up is more likely to be sold into and remain capped near the $4,100 support-turned-resistance. The next hurdle is clustered around the 100-period EMA at $4,135.95. The XAU/USD pair would need a sustained move above the said barrier for any shift to a more constructive outlook and additional gains toward reclaiming the $4,200 mark.

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

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.