Fed hike bets restrain gold’s recovery from YTD low beyond $3,900

• Prospects for diplomacy over Iran weigh on the safe-haven USD, drawing some buyers to Gold on Monday.
• The latest optimism remains constrained by Ukrainian strikes on Russia and US warnings of further military action.
• Expectations of a Fed rate rise also cushion the USD and restrain the commodity before this week’s US economic releases.

Oil-driven inflation concerns continue to underpin expectations of a US Federal Reserve (Fed) rate rise, potentially restraining non-yielding Gold (XAU/USD) as it opens the week higher. The metal has ended a two-day run of losses, recovering some of Friday’s sharp fall below $3,900 to its lowest level since October 2025. Support comes from hopes that a diplomatic breakthrough could end the US-Iran war, limiting demand for the safe-haven US Dollar (USD).

Talks between Iranian negotiators and Qatari mediators reportedly continued for a third consecutive day on Sunday, with the aim of securing an agreement to end the US-Israeli war on Iran. Iran has also put forward a two-day (48-hour) plan for reopening the Strait of Hormuz, conditional on the US meeting several demands. These include removing sanctions imposed following the Islamabad memorandum and reducing US forces in the region. US President Donald Trump added to the positive tone, saying negotiations with Iran were going fine and that Iran wanted a deal.

Nevertheless, further military action after the 3 November midterm elections remains an option, Trump said. Iran’s Supreme Leader, Mojtaba Khamenei, has also instructed his senior military commanders to prepare for another confrontation with the US and Israel and broaden Tehran’s options for retaliation. Together with renewed Ukrainian strikes on Russian oil refineries, these developments sustain the geopolitical risk premium and leave USD bears under pressure. That calls for caution before positioning for additional gains in the Gold price.

Resilient growth and persistent price pressures in last Thursday’s US economic figures reinforced expectations of further Fed tightening. Traders now assign around a 75% probability to another increase in US borrowing costs in December, according to the CME Group’s FedWatch Tool. With attention turning to the major US economic releases due at the beginning of a new month, sustained follow-through buying would therefore be required to confirm a near-term bottom in XAU/USD.

Later today brings the US ISM Manufacturing PMI, with the ISM Services PMI following on Wednesday. Friday then sees the closely watched monthly US employment figures, commonly referred to as the Nonfarm Payrolls (NFP) report. Until then, the fundamental backdrop outlined above suggests that further recovery attempts are more likely to encounter selling and remain limited.

XAG/USD on the 4-hour chart

Technical Indicators Maintain a Bearish Bias

A key signal for bearish traders came on Friday when the price broke below the psychological $4,000 level and held beneath it. The precious metal also remains well below its 100-period Exponential Moving Average (EMA) on the 4-hour chart, reinforcing the negative near-term outlook. In addition, the Moving Average Convergence Divergence (MACD) is still in negative territory, with its line below the signal line and the histogram weak. However, the Relative Strength Index (RSI), at 28.94, is in oversold territory. This suggests that, although selling pressure remains dominant, the latest decline may be overextended in the short term.

Further advances are nevertheless more likely to meet renewed selling and be contained around the 100-period EMA at $4,068.55. Buyers would need to regain this key level to reduce the prevailing bearish bias. For potential demand on the downside, traders will now focus on Friday’s swing low near $3,870. A break below that area should open the way for the established downtrend to extend.

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