Gold holds steady below $4,150 as traders weigh Fed rate outlook and Middle East risk

• At around $4,125, Gold trades steadily in early Asian dealing on Thursday.
• An October Fed rate hold carries a probability of around 84%.
• Oil prices rise as Middle East tensions intensify, potentially putting pressure on Gold.

Around $4,125 is the prevailing level for Gold (XAU/USD) in Thursday’s early Asian trading, with prices holding steady. Against a backdrop of continuing Middle East tensions, the precious metal has fluctuated as traders weigh the Federal Reserve’s (Fed) prospective interest-rate path.

Inflation coming in above expectations had not altered his assessment of the US economy, Fed Chairman Kevin Warsh said last week, while declining to indicate the likely outcome of this month’s policy meeting. The CME FedWatch tool now puts the probability of rates remaining unchanged at the October meeting at 84%.

Although a hold next week is widely anticipated, another increase at the December meeting remains priced into markets, leaving the policy outlook skewed towards tightening. Gold could consequently face pressure. As the metal pays no interest, higher rates usually reduce its appeal relative to yield-bearing assets.

Higher energy costs also raise the prospect of the US central bank having to adjust monetary policy further to curb price pressures.

Growing threats to Middle East supplies are keeping traders uneasy. On Wednesday, Iran’s Foreign Minister Abbas Araghchi said that “while ‌‌Iran is firmly committed to seeking a dignified peaceful resolution to the conflict, we are also fully prepared to defend ourselves.” Iranian President Masoud Pezeshkian, meanwhile, said the US cannot expect talks with Iran while maintaining a blockade and threatening the country.

Dollar edges higher as French unrest pressures equities and risk appetite shifts

A marked divergence between markets is evident, according to Commerzbank analysts, who observe that "European equities declined amid political unrest in France, while US Treasury yields rose as the equity recovery reduced safe-haven demand." They also note that "the USD was slightly firmer," as stabilising sentiment towards US assets prompted a modest move back towards the Dollar.

Weaker commodity prices also feature in Commerzbank’s assessment: the bank reports that "Brent crude oil prices fell 0.3% to USD109.55" and that "Gold fell 0.6% to USD4,141," illustrating the pressure on traditional hedges from rising US yields and diminishing safe-haven demand.

Warsh balances crisis-driven caution with optimism over investment and AI

A FXS Speechtracker reading of 5.6/10 accompanied Fed Chair Warsh’s moderately constructive remarks. Slightly below the historical average of 6.1/10, the score suggests the speech offered markets only modest additional information. His acknowledgement of being “over-scarred” by the Global Financial Crisis points to an enduring inclination towards caution over financial stability. At the same time, Warsh emphasises structural growth, a surge in investment and confidence in achieving price stability, without committing in advance to decisions in October or December. By presenting AI as both a near-term source of demand and a means of improving data and monetary policy, Warsh signals a forward-looking approach that could eventually bolster the Dollar should expectations for productivity and growth strengthen.

A move of 0.00 points left the FXS Fed Sentiment Index unchanged at a still-hawkish 127.51. Despite the slightly weaker FXS Speechtracker reading, the speech therefore brought no material change in perceptions of the policy stance. The elevated index level, alongside no day-on-day movement, suggests markets still regard the Fed as firmly hawkish, balancing Warsh’s caution shaped by past crises against his optimism about investment and AI-led growth.

Technical Analysis: Gold struggles below the 100-day SMA

A bearish near-term bias persists on the daily XAU/USD chart, where spot trades beneath both the 20-period Bollinger simple moving average and the 100-day moving average. Prices nevertheless remain above the lower Bollinger Band, pointing to short-term consolidation rather than an outright breakdown. At 42.60, the Relative Strength Index occupies neutral-to-weak territory, indicating that downside momentum remains evident without appearing overstretched.

The Bollinger midline around $4,160 provides the first upside resistance, ahead of the 100-day moving average at $4,230. Any attempted bullish recovery would face a firmer barrier at the upper Bollinger Band of $4,255. Immediate downside support lies near $4,070 at the lower Bollinger Band. A sustained breach would leave scope for a deeper retreat; if that floor holds, XAU/USD would retain a bearish bias while remaining range-bound.

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