Gold trades above $4,000 as FOMC decision keeps USD bulls on hold

• A third consecutive day of USD strength leaves Gold struggling to extend its overnight advance.
• Recovering US bond yields, expectations of a Fed rate rise and geopolitical uncertainty keep the USD supported.
• With traders awaiting the pivotal FOMC decision, scope for further XAU/USD losses appears limited.

The $4,000 psychological level holds for Gold (XAU/USD), although renewed selling in Tuesday's Asian session interrupts the previous day's modest recovery from near a three-month low. A stronger US Dollar (USD) weighs on the precious metal, but traders appear reluctant to commit ahead of Wednesday's conclusion of the two-day FOMC policy meeting.

Markets continue to price in a probability of over 80% that the Federal Reserve (Fed) will increase borrowing costs again at its December policy meeting, despite recent signals from officials that a rate rise is not urgent. Inflation concerns linked to high energy prices also reinforce expectations of additional Fed tightening. With no updated economic projections due, attention will therefore centre on the accompanying policy statement and remarks from Fed Chair Kevin Warsh at the post-meeting press conference.

Further indications of the Fed's policy direction will be sought from the Advance US Q3 GDP release and the Personal Consumption Expenditures (PCE) Price Index. The resulting outlook will be an important driver of US Dollar (USD) movements and could give non-yielding Gold fresh impetus. Ahead of these key policy and data events, the safe-haven dollar is drawing support from Middle East tensions and a modest rebound in US bond yields following their recent retreat to a three-week low.

Stalled US-Iran negotiations and fresh attacks on Saudi Arabia by Iran-aligned Houthis are keeping the geopolitical risk premium in place. On Monday, the Houthis said they had struck Saudi Arabia's East-West crude oil pumping stations and Riyadh airport. Meanwhile, reports that Lebanese armed group Hezbollah is preparing for a possible return to hostilities with Israel have further weakened hopes of near-term stability in the region. These developments support USD bulls and suggest gold's path of least resistance is still lower.

XAU/USD on the 4-hour chart

Technical Analysis Points to Continued Downside Pressure

A recent break below a short-term trading range leaves the commodity's near-term outlook bearish. On the 4-hour chart, the precious metal also remains well beneath the 200-period Simple Moving Average (SMA) at $4,198.08, the main obstacle to gains. Momentum signals have improved slightly: the Moving Average Convergence Divergence (MACD) line is rising above zero, while the Relative Strength Index (RSI) has climbed out of oversold territory towards the mid-30s. Rather than signalling a decisive change in trend, however, these improvements merely suggest a corrective rebound.

A sustained move below $4,000 would nevertheless be required to strengthen the case for further declines. Any recovery initially faces resistance around $4,065-$4,075, where the trading range broke down, followed by $4,100. Beyond that level, XAU/USD could target a test of the 200-period SMA and a return above the $4,200 round number. Holding above this barrier would reduce the prevailing bearish bias and pave the way for a more substantial recovery.

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