Fed hike bets push gold to one-week low below $4,100 as bulls look past weak USD

• Expectations of a December Fed rate rise strengthen, prompting renewed selling in gold on Thursday.
• Lower US bond yields weigh on the USD, but the commodity draws no support from the currency’s weakness.
• Geopolitical uncertainty supports USD bulls and strengthens the argument for further XAU/USD losses.

A fresh one-week low is reached by gold (XAU/USD) during Thursday’s Asian session as selling pressure resumes. Bears are now seeking to push the decline further below $4,100.

US inflation data published last week reinforced expectations that the Federal Reserve (Fed) will raise interest rates imminently. Traders are assigning around a 90% probability to a December increase in US borrowing costs, according to the CME Group’s FedWatch Tool. Concerns about inflation arising from volatile oil prices also support the prospect of additional Fed tightening. This is viewed as a major reason for flows out of non-yielding gold.

With Fed officials recently signalling no urgency to increase rates at the forthcoming 27–28 October meeting, the US Dollar (USD) is nevertheless finding few meaningful buyers and remains near Tuesday’s three-week low. US bond yields are also continuing to retreat from multi-year highs, leaving USD bulls under pressure. Even so, the possibility of a further escalation in Middle East tensions might provide some support for the safe-haven dollar.

Addressing the Middle East crisis, Iran’s Foreign Minister, Abbas Araghchi, said the country was ready for diplomacy but also stressed its preparedness to defend itself. He saw little grounds for expecting progress at present, adding that the US had demonstrated no willingness to reach an understanding. In a separate report, The New York Times said the US and Israel had prepared plans for a brief but intensive military campaign against Iran following the US midterm elections.

The resulting geopolitical risk premium continues to favour USD bulls, leaving the balance of risks for gold tilted towards further declines. Confirmation of a break below the trading range would, however, require follow-through selling, and waiting for that confirmation before positioning for additional losses would remain prudent. Thursday’s US Weekly Initial Jobless Claims release is the next potential catalyst for traders, followed by Friday’s global flash PMIs. Next week’s FOMC meeting nonetheless remains the main focus.

XAU/USD on the 4-hour chart

Technical indicators point to continued downside pressure

Trading below the 200-period Simple Moving Average (SMA) on the 4-hour chart leaves XAU/USD with a bearish near-term bias. The Moving Average Convergence Divergence (MACD) indicator is also negative, with its line beneath the signal line, while the Relative Strength Index (RSI) sits in the mid-30s. Taken together, these momentum readings point to continuing downward pressure, although conditions are nearing oversold levels.

The monthly swing low around $4,075-$4,065 could, however, provide support if prices fall further. Selling beyond that area would be regarded as a fresh bearish trigger, leaving gold exposed to a faster decline towards intermediate support at $4,030-$4,025 and then the psychological $4,000 level.

For any recovery, the first obstacle could emerge around $4,140. A move above that area could allow the precious metal to attempt another break through $4,200. Sustained gains beyond that level could take gold towards the 200-period SMA at $4,232. Clearing the latter would relieve the prevailing bearish pressure and create scope for a more substantial corrective rebound.

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