$4,150 gives way as gold retreats on rising Fed rate hike bets despite US-Iran deal hopes

$4,125 is gold’s approximate price after edging down in early Asian trading on Tuesday.
An 84% probability of a December Fed rate hike is priced into markets.
Further airstrikes on Iran will not be needed, according to Trump.

$4,125 is the approximate level for Gold price (XAU/USD) as it slips in Tuesday’s early Asian session. Stronger-than-forecast US Nonfarm Payrolls (NFP) data have fuelled expectations of additional US interest rate increases, putting pressure on the precious metal. For fresh direction, traders will watch developments in the US-Iran peace deal aimed at ending the war.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

October US payrolls increased by 165,000, exceeding forecasts and rising from September’s 60,000. Released last week, the robust employment figures strengthened expectations that the Federal Reserve (Fed) could maintain higher interest rates for longer.

October’s unemployment rate, meanwhile, declined to 4.1%. As higher interest rates raise the opportunity cost of owning gold, which pays no yield, the metal becomes less appealing to investors.

According to the CME FedWatch tool, the probability traders assign to a December Fed rate increase now stands at around 84.0%. Before the US employment report, it was 72.8%.

Lower crude prices, however, could temper inflation worries and cushion gold’s decline. Oil sold off sharply after US President Donald Trump played down the prospect of further strikes on Iran. Attacks on vessels near the Strait of Hormuz nevertheless kept concerns over supply in focus.

+5.06% for gold as risk aversion pressures equities and yields

A defensive bid for gold has developed despite mixed performance across other major asset classes, according to Deutsche Bank’s assessment. Its analysts describe credit markets as “fairly flat on both sides of the Atlantic,” while noting that the “risk-off tone in equities meant it was a good week for gold, which was up +5.06% (-0.42% Friday) in its best week since August.” They say the change in sentiment, “along with the risk-off tone from the AI selloff,” “helped to bring down sovereign bond yields around the world.” Nonetheless, Deutsche Bank notes that “the 10-year US Treasury yield is up +1bps at 4.87% and Brent down around a percent as I type,” highlighting the divergent moves elsewhere in markets.

100-day SMA Caps Gold: Technical Analysis

Spot XAU/USD trades between the 20-day Bollinger middle band support and the 100-day Simple Moving Average (SMA) on the daily chart, leaving near-term upside constrained. Rather than signalling a decisive bullish breakout, the setup indicates a corrective rebound within a wider consolidation. A Relative Strength Index (RSI) reading of around 52 reflects only mildly positive momentum.

The 100-day SMA near $4,200 marks the first resistance level, followed by a more substantial hurdle at the upper Bollinger band around $4,225. Renewed scope for higher highs would require a daily close above this resistance cluster. Below the market, the Bollinger middle band provides initial support around $4,065, followed by the lower band near $3,900. A break beneath that lower band would open the way for a deeper correction towards earlier cycle lows.

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

Gold: Key Questions

What attracts investors to Gold?

Widely used to preserve value and facilitate exchange, gold has held an important place throughout human history. Beyond its lustre and use in jewellery, the precious metal is now commonly regarded as a safe-haven asset: an investment considered attractive during periods of turmoil. Its independence from any particular issuer or government also underpins gold’s widespread role as a hedge against inflation and currency depreciation.

Which buyers hold the most Gold?

The largest holders of gold are central banks. To bolster their currencies during unsettled periods, they typically diversify reserves and purchase gold, strengthening perceptions of both their economies and their currencies. Substantial gold reserves can reinforce confidence in a country’s solvency. World Gold Council data show that central banks increased their reserves by 1,136 tonnes in 2022, valued at around $70 billion. No higher annual purchase has been recorded since records began. Emerging-economy central banks, including those in China, India and Turkey, are rapidly expanding their gold holdings.

How does Gold move relative to other assets?

The US Dollar and US Treasuries, both major reserve and safe-haven assets, have an inverse correlation with gold. Dollar weakness typically supports gold prices, allowing investors and central banks to diversify their holdings during turbulent periods. The metal also tends to move in the opposite direction to risk assets. Equity rallies generally put pressure on gold, whereas selling in riskier markets tends to support it.

Which factors drive Gold prices?

Many factors influence gold’s price. Its safe-haven appeal means geopolitical unrest or concerns about a deep recession can trigger rapid gains. Lower interest rates generally support this non-yielding asset, while higher borrowing costs usually weigh on it. Most price movements, however, hinge on the performance of the US Dollar (USD), since gold is quoted in dollars (XAU/USD). Dollar strength tends to restrain gold prices; a weaker Dollar is more likely to lift them.