Gold drops below $4,000 as Fed rate hike expectations outweigh lower bond yields and a weaker USD

• Gold retreats towards its monthly low, extending the previous day’s sharp decline.
• Oil-related inflation concerns strengthen expectations of a Fed rate rise, weighing on the precious metal.
• Lower US bond yields put substantial pressure on the USD but offer no support to bullion.

Resilient US growth and persistent price pressures in Thursday’s economic releases have reinforced expectations of an imminent December interest rate rise by the US Federal Reserve (Fed). Against this hawkish backdrop, Gold (XAU/USD) faces further selling for a second consecutive day, falling below the psychological $4,000 level during Friday’s Asian session. The prospect of higher rates is seen as weighing on non-yielding bullion.

US economic growth picked up to an annualised 3.4% in the third quarter, according to the preliminary Gross Domestic Product (GDP) estimate. That compares with 2.2% in the preceding quarter and a consensus forecast of 3.2%. Meanwhile, figures from the US Commerce Department showed that the Personal Consumption Expenditures (PCE) Price Index increased by 0.5% in September, taking the annual rise to 3.6%. Excluding volatile food and energy prices, the core measure rose by 0.3% month on month and 3.1% year on year. Alongside inflation concerns arising from elevated US bond yields, these figures support expectations of further Fed policy tightening.

Weak technology earnings, however, prompted a rush into safe-haven government bonds, sending US Treasury yields sharply lower as investors questioned whether increased AI spending would generate sufficient returns. Renewed hopes of a diplomatic resolution to conflicts in the Middle East also pushed the safe-haven US Dollar (USD) down for a third consecutive day. Even so, the decline has done little to relieve selling pressure on gold. In the latest diplomatic efforts, US Vice President JD Vance wrote directly to Mohsen Rezaei, secretary of Iran's Supreme National Security Council, seeking to revive peace negotiations. Qatar also submitted a new draft agreement to Iran aimed at ending the war with the US and Israel.

Escalating hostilities between Saudi Arabia and the Iran-backed Houthi group in Yemen nevertheless continue to unsettle investors. The geopolitical risk premium also remains firmly in place, with the US and Israel threatening to resume attacks after the US midterm elections. On Thursday, Iran's navy claimed that four oil tankers had hit sea mines in the Strait of Hormuz, fuelling concerns over supply disruptions and lending support to oil prices. This strengthens the argument for renewed buying of the USD on dips, suggesting that gold’s path of least resistance remains lower and that any rebound is likely to attract sellers. XAU/USD nonetheless remains on course for a monthly decline of around 3.5%.

XAU/USD declines on the 4-hour chart

Technical Analysis Points to Further Downside

A clearly defined descending parallel channel continues to contain the precious metal’s decline, leaving its near-term outlook negative. On the 4-hour chart, trading below the 100-period Exponential Moving Average (EMA) strengthens the bearish structure, with that average expected to provide dynamic resistance above the market. Momentum readings tell a similar story: the Relative Strength Index (RSI) is close to 35, while the Moving Average Convergence Divergence (MACD) line remains below zero. Together, these indicators suggest that sellers retain control and that nearby resistance is likely to limit rebounds.

A fall below the previous monthly swing low near $3,975 would bring the next significant support into view at around $3,946, where the descending parallel channel’s lower boundary lies. Should that floor give way decisively, bearish traders would see a fresh trigger, leaving scope for further losses over the coming sessions.

Any rebound, by contrast, is likely to meet initial resistance in the $4,025-$4,030 horizontal area. A move above it could prompt short covering and carry Gold towards the 100-period EMA at around $4,093, followed by the channel’s upper boundary near $4,126. These levels form a wider supply zone that would need to be regained before bearish pressure could ease.

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