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Gold holds above $4,000/three-month low as Fed hike bets and firm USD cap upside

FXStreet · 2026-10-23T03:41:35Z
Gold holds above $4,000/three-month low as Fed hike bets and firm USD cap upside
  • Gold stages a modest recovery from a three-month low, though bulls seem hesitant.
  • December Fed rate hike bets and a modest USD strength keep a lid on the commodity.
  • Market attention now shifts to the crucial FOMC policy meeting, starting next Tuesday.

Gold (XAU/USD) struggles to capitalize on its modest recovery from levels below the $4,000 psychological mark, or a three-month low set earlier this Friday, and retains a bearish tone through the first half of the European session. Federal Reserve (Fed) officials recently signaled there is no urgency to raise interest rates. Traders, however, are still pricing in around an 80% chance that the US central bank will raise borrowing costs again at its December policy meeting. Moreover, oil-driven inflationary concerns underpin prospects for further Fed tightening, which, in turn, is seen as capping the upside for the non-yielding bullion.

In fact, crude oil prices sit near a one-month peak, touched on Tuesday, due to supply concerns stemming from escalating conflict in the Middle East. The fighting between Saudi Arabia and Yemen's Iran-backed Houthi movement has escalated sharply, leading to Houthi drone and missile strikes on the kingdom's airports and critical energy infrastructure. In further developments, Iran’s Islamic Revolutionary Guard Corps (IRGC) said that renewed US attacks could prompt Tehran to invade neighbouring countries and hit bases used in US military operations as part of its new offensive strategy.

This comes on top of a report that the US and Israel have drawn up plans for a short but intense military campaign against Iran after the US midterm elections and keeps the geopolitical risk premium in play. Moreover, hawkish Fed expectations help the safe-haven USD to recover slightly from a three-week low, which exerts additional downward pressure on the Gold price. Traders, however, might refrain from placing fresh directional bets and opt to wait for more cues about the Fed's policy path. Hence, the focus will remain on next week's highly anticipated two-day FOMC meeting.

The Fed will announce its decision on Wednesday and is widely expected to leave interest rates unchanged. In the absence of updated economic projections, investors will scrutinize the accompanying policy statement and Fed Chair Kevin Warsh's comments during the post-meeting press conference. This will be followed by the release of the Advance US Q3 GDP report and the US Personal Consumption Expenditures (PCE) Price Index – the Fed's preferred inflation gauge – next Thursday, which will play a key role in influencing the USD and provide a fresh impetus to the Gold price.

XAU/USD daily chart

Chart Analysis XAU/USD

Technical Analysis

The overnight breakdown below a short-term trading range support and a sustained close below the $4,100 mark was seen as a key trigger for XAU/USD bears. Moreover, the Relative Strength Index at 34.34 hovers just above oversold territory, and the Moving Average Convergence Divergence (MACD) at -6.51 stays in negative territory, hinting that downside pressure persists despite some early signs of stabilization. The precious metal, however, shows some resilience below the $4,000 psychological mark, warranting some caution before positioning for further losses.

Meanwhile, any attempted recovery is more likely to attract fresh sellers and fizzle out near the trading range support breakpoint, now turned resistance, near the $4,065-$4,070 region. This is followed by the $4,100 round figure, which, if conquered, could trigger a short-covering rally and lift the XAU/USD pair to the $4,170 intermediate hurdle en route to the $4,200 mark. Sustained strength and acceptance above the latter is needed to back the case for a sustained near-term recovery.

(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.