- Gold attracts some buyers on Friday as the USD pauses after a strong rally to a 19-month peak.
- Fed hike bets and geopolitical risk could limit deeper USD losses and cap the upside for bullion.
- The technical setup further warrants some caution before positioning for any meaningful gains.
Gold (XAU/USD) clings to modest recovery gains above the $3,900 mark during the Asian session on Friday, snapping its three-day losing streak to the lowest level since late September set the previous day. The US Dollar (USD) takes a breather after a strong three-day rally to its highest level since April 2025, offering some support to the commodity. However, firming US Federal Reserve (Fed) rate-hike expectations and Middle East uncertainties continue to support the Greenback. This, in turn, keeps a lid on any further upside for the precious metal.
Against the backdrop of hotter-than-expected US October consumer inflation figures, hawkish commentary from several Federal Reserve (Fed) officials prompted traders to price in a tighter monetary policy stance. In fact, the CME Group's FedWatch Tool indicates that a 25-basis-points (bps) rate hike in December is fully priced in, and traders are assigning around a 13% chance of a jumbo 50-bps increase. This, along with the overnight move higher in crude oil prices, led to an extended selloff in US Treasuries, lifting the yield on the benchmark 10-year government bond further beyond the 5% threshold and favoring USD bulls.
Meanwhile, US President Donald Trump on Thursday issued a fresh warning to Iran and said that those responsible for any attack on American officials would no longer exist. Trump added that he would not hesitate to launch further military action if the situation warranted it. Adding to this, Trump wrote in a Truth Social post that the US does not need a deal with Iran, adding that those days have long since passed. Moreover, attacks on Saudi Arabia's energy infrastructure and commercial ships in the Strait of Hormuz keep the geopolitical risk premium in play, which validates the positive USD outlook and should cap the Gold price.
Moving ahead, the US Producer Price Index (PPI) highlights Friday's economic docket. Furthermore, speeches from influential FOMC members would influence expectations about the Fed's policy path. Apart from this, the incoming geopolitical headlines might continue to infuse volatility in global financial markets and drive USD demand, providing some impetus to the commodity. Nevertheless, the XAU/USD pair remains on track to register weekly losses. Meanwhile, the fundamental backdrop seems tilted firmly in favor of USD bulls, suggesting that any subsequent rise in the gold price is more likely to be sold into and remain capped.
XAU/USD 4-hour chart
Technical Analysis
The XAU/USD pair maintains a near-term bearish bias following the recent repeated failures near the $4,150 horizontal resistance and a break below the 100-period Exponential Moving Average (EMA) on the 4-hour chart. Moreover, momentum indicators stay weak, with the Relative Strength Index (RSI) hovering near the oversold band at 35.43 and the Moving Average Convergence Divergence (MACD) holding in negative territory with the line around -15.22. This, in turn, hints that downside pressure is still dominant despite the early signs of exhaustion.
Hence, any further move up could face initial resistance near the $3,960 area ahead of the $4,000 psychological mark and the 100-period EMA at $4,037.06. A sustained recovery above this barrier would be needed to ease the current bearish setup and open the way for a broader corrective bounce towards the $4,100 round figure en route to the $4,150 barrier. On the downside, the $3,865-$3,855 region, or the year-to-date low, could act as an interim demand area, which, if broken, will set the stage for an extension of a well-established downtrend from the August swing high.
(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.
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.