Why has Gold fallen to a one-week low below $4,100 as Fed hike bets leave bulls unmoved by weak USD?

Fresh selling weighs on Gold on Thursday as expectations strengthen for a Fed rate hike in December.
Gold receives no support from USD weakness, even as declining US bond yields weigh on the currency.
Geopolitical uncertainty supports USD bulls and strengthens the argument for further losses in XAU/USD.

Renewed selling weighs on Gold (XAU/USD) during Thursday’s Asian session, pushing the metal to a fresh one-week low. Bears are now seeking to extend the decline further below $4,100.

Expectations of an imminent interest rate increase by the Federal Reserve (Fed) were reinforced by the latest US inflation data released last week. Traders are assigning around a 90% probability to a December increase in borrowing costs, according to the CME Group’s FedWatch Tool. Meanwhile, inflation concerns arising from volatile oil prices bolster the prospect of additional Fed policy tightening. This is viewed as a key reason for flows moving away from non-yielding Gold.

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

Despite this, meaningful buying interest in the US Dollar (USD) remains elusive, leaving it near the three-week low reached on Tuesday. Recent signals from Fed officials suggest there is no urgency to increase rates at the forthcoming October 27–28 meeting. A continuing pullback in US bond yields from multi-year highs is also keeping USD bulls under pressure. Nevertheless, the possibility of a further escalation in Middle East tensions might provide some support to the safe-haven Greenback.

On the Middle East crisis, Iran’s Foreign Minister, Abbas Araghchi, said the country was ready for diplomacy, while stressing that it was also prepared to defend itself. With the US showing no willingness to reach an understanding, Araghchi said there was little reason to anticipate progress at present. In a separate report, The New York Times said the US and Israel had prepared plans for a brief but intense military campaign against Iran following the US midterm elections.

The geopolitical risk premium therefore remains a factor supporting USD bulls, indicating that Gold’s path of least resistance is still lower. Even so, waiting for follow-through selling would be prudent before confirming a break below the trading range and positioning for additional declines. For near-term direction, traders are watching Thursday’s US Weekly Initial Jobless Claims release, followed by Friday’s global flash PMIs. The main focus, however, remains next week’s FOMC meeting.

What Does the XAU/USD 4-hour Chart Indicate?

Technical Analysis: Can Gold Extend Its Decline?

Trading below the 200-period Simple Moving Average (SMA) on the 4-hour chart, XAU/USD retains a bearish near-term bias. The Moving Average Convergence Divergence (MACD) indicator is also in negative territory, with its line beneath the signal line, while the Relative Strength Index (RSI) sits in the mid-30s. Taken together, these momentum readings point to continuing downward pressure, although conditions are nearing oversold levels.

The $4,075-$4,065 zone, which marks the monthly swing low, could offer some support if prices decline further. Selling beyond that region would be viewed as a fresh trigger for bearish traders, leaving Gold vulnerable to an accelerated slide towards intermediate support at $4,030-$4,025, followed by the psychological $4,000 level.

For a recovery, the first obstacle could emerge around $4,140. A move above that area could allow the precious metal to attempt another break through $4,200. Sustained gains beyond this level could take Gold towards the 200-period SMA at $4,232. Clearing that barrier would reduce the prevailing bearish pressure and create scope for a more substantial corrective rebound.

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

Frequently Asked Questions About the Fed

How does the Federal Reserve’s role affect the US Dollar?

The Federal Reserve (Fed) sets US monetary policy with a dual mandate of maintaining price stability and promoting full employment. Adjustments to interest rates are its main means of pursuing these objectives. If prices increase too rapidly and inflation exceeds the Fed’s 2% target, the central bank raises interest rates, pushing up borrowing costs across the economy. Higher rates strengthen the US Dollar (USD) by making the US a more attractive destination for international investors’ funds. Conversely, inflation below 2% or an excessively high Unemployment Rate may prompt the Fed to cut interest rates to stimulate borrowing, putting pressure on the Greenback.

What is the frequency of the Fed’s monetary policy meetings?

At eight policy meetings each year, the Federal Reserve’s Federal Open Market Committee (FOMC) reviews economic conditions and decides on monetary policy. Twelve Fed officials attend the FOMC: the seven Board of Governors members, the president of the Federal Reserve Bank of New York, and four presidents drawn from the other eleven regional Reserve Banks. The latter four serve rotating one-year terms.

How does Quantitative Easing (QE) work, and what does it mean for USD?

When conditions become extreme, the Federal Reserve may adopt Quantitative Easing (QE), a policy that substantially expands the flow of credit through a stalled financial system. This unconventional measure is used during crises or periods of exceptionally low inflation. During the Great Financial Crisis in 2008, it was the Fed’s preferred policy tool. Under QE, the Fed prints additional Dollars to purchase high-grade bonds from financial institutions. The policy generally weakens the US Dollar.

How does Quantitative Tightening (QT) affect the US Dollar?

By reversing QE, Quantitative tightening (QT) brings an end to the Federal Reserve’s bond purchases from financial institutions. The Fed also refrains from reinvesting the principal repaid on its maturing bond holdings in new bonds. This process generally supports the US Dollar’s value.