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Gold bounces off multi-month low amid sustained USD selling; Fed hike bets might cap gains

FXStreet · 2026-10-30T04:46:41Z
Gold bounces off multi-month low amid sustained USD selling; Fed hike bets might cap gains
  • Gold adds to the previous day’s heavy losses and hits a fresh monthly low on Friday.
  • Oil-driven inflation fears bolster Fed hike bets, exerting pressure on the precious metal.
  • Declining US bond yields weigh heavily on the USD, offering some support to the bullion.

Gold (XAU/USD) stages a modest intraday recovery from the $3,965 region, or its lowest level since July 17, touched earlier this Friday, as the US Dollar (USD) selling remains unabated. US Treasury yields tumbled as investors rushed into safe-haven government bonds after weak tech earnings raised concerns that rising AI spending may not deliver sufficient returns. Moreover, reviving hopes for a diplomatic solution to end conflicts in the Middle East dragged the safe-haven US Dollar (USD) lower for the third straight day, offering some support to the commodity.

In the latest developments, US Vice President JD Vance sent a direct letter to the secretary of Iran's Supreme National Security Council, Mohsen Rezaei, in an effort to restart peace negotiations. Furthermore, Qatar presented Iran with a new draft deal to end the war with the US and Israel.
However, investors remain wary amid escalating hostilities between the Iran-backed Houthi group in Yemen and Saudi Arabia. Furthermore, threats from the US and Israel to restart attacks after the US midterm elections keep the geopolitical risk premium firmly in play. Meanwhile, Iran's navy claimed Thursday that four oil tankers had struck sea mines in the Strait of Hormuz, adding to supply disruption worries and lifting oil prices to a fresh multi-month peak.

Furthermore, US macro data released on Thursday pointed to a resilient economy and persistent price pressures, solidifying bets of an imminent rate hike by the US Federal Reserve (Fed) in December, which might cap any meaningful appreciation for the non-yielding Gold. In fact, the first estimate of the US Gross Domestic Product (GDP) showed the economic growth accelerated to an annualised rate of 3.4% in the third quarter, up from 2.2% previously. Separately, the US Commerce Department reported that the Personal Consumption Expenditures (PCE) Price Index climbed 0.5% in September and 3.6% from a year ago. Moreover, the core gauge, which excludes volatile food and energy prices, rose 0.3% and 3.1% on a monthly basis and yearly basis, respectively.

This comes on top of inflationary concerns stemming from elevated US bond yields and underpins prospects for further policy tightening by the Fed, warranting some caution before confirming that gold has formed a near-term bottom. Moreover, the aforementioned factors back the case for the emergence of some USD dip-buying and suggest that any subsequent move up in the XAU/USD pair is more likely to be sold into.

XAU/USD 4-hour chart

Chart Analysis XAU/USD

Technical Analysis

The precious metal extends its slide within a well-defined downward parallel channel, maintaining a negative near-term bias. Adding to this, the commodity trades below the 100-period Exponential Moving Average (EMA) on the 4-hour chart, which reinforces the bearish structure and should act as dynamic resistance overhead. Meanwhile, momentum indicators further validate the negative tone, with the Relative Strength Index (RSI) hovering near 35 and the Moving Average Convergence Divergence (MACD) line in negative territory. This, in turn, suggests that selling pressure remains dominant while rebounds are likely to be capped by nearby resistance.

On the downside, weakness below the previous monthly swing low, around $3,975, would expose the next notable support marked by the lower boundary of the descending parallel channel, around $3,946. A decisive break beneath this floor would be seen as a fresh trigger for bearish traders and open the door to deeper losses in the coming sessions.

On the topside, any attempted recovery is more likely to confront initial resistance at the $4,025-$4,030 horizontal zone, above which a bout of short covering could lift the Gold to the 100-period EMA around $4,093, ahead of the channel’s upper boundary near $4,126, forming a broader supply zone that would need to be reclaimed to ease bearish pressure.

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

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.