Fed rate hike bets drag gold below $4,000 despite falling bond yields and a weak USD

Selling pressure brings Gold back towards its monthly low, extending the previous day’s sharp decline.
The precious metal remains under pressure as oil-led inflation concerns strengthen expectations of a Fed rate hike.
Bullion finds no support from falling US bond yields, even as they put substantial pressure on the USD.

Selling pressure keeps Gold (XAU/USD) on the defensive for a second consecutive day, taking it below the psychological $4,000 level in Friday’s Asian session as markets anticipate a hawkish US Federal Reserve (Fed). Behind those expectations were Thursday’s US macroeconomic releases, which indicated resilient economic growth alongside persistent price pressures. The figures reinforced bets on an imminent December rate hike, a prospect seen as weighing on non-yielding bullion.

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

At an annualised 3.4%, US economic growth in the preliminary third-quarter Gross Domestic Product (GDP) estimate exceeded both the previous quarter’s 2.2% and the consensus projection of 3.2%. Price data added to the picture: according to the US Commerce Department, the Personal Consumption Expenditures (PCE) Price Index increased 0.5% in September and 3.6% year-on-year. Excluding volatile food and energy prices, the core measure advanced 0.3% month-on-month and 3.1% year-on-year. Together with inflation concerns arising from elevated US bond yields, these readings support expectations of additional Fed policy tightening.

A rush into safe-haven government bonds sent US Treasury yields sharply lower after disappointing technology earnings fuelled doubts over whether rising AI expenditure would generate adequate returns. At the same time, renewed optimism about a diplomatic resolution to Middle East conflicts pushed the safe-haven US Dollar (USD) down for a third consecutive day. The currency’s decline, however, has done little to relieve bearish pressure on gold. Among the latest developments, US Vice President JD Vance wrote directly to Mohsen Rezaei, secretary of Iran’s Supreme National Security Council, seeking to revive peace talks. Qatar also put forward a new draft agreement to Iran aimed at ending the war with the US and Israel.

Investor caution nevertheless persists as hostilities intensify between Saudi Arabia and Yemen’s Iran-backed Houthi group. The geopolitical risk premium also remains firmly in place, with the US and Israel threatening to resume attacks after the US midterm elections. Supply disruption concerns gained further traction when Iran’s navy claimed on Thursday that four oil tankers had hit sea mines in the Strait of Hormuz, lending support to oil prices. This strengthens the case for buying interest in the USD on dips, indicating that gold’s path of least resistance remains lower and that any rebound is likely to attract selling. XAU/USD is still heading for a monthly decline of around 3.5%.

What does the XAU/USD 4-hour chart show?

Can Gold Reverse Its Bearish Technical Bias?

A clearly defined descending parallel channel continues to contain the precious metal’s decline, leaving the near-term outlook negative. On the 4-hour chart, trading below the 100-period Exponential Moving Average (EMA) further strengthens the bearish structure, with that average expected to provide dynamic overhead resistance. Momentum readings reinforce this view: the Relative Strength Index (RSI) is near 35, while the Moving Average Convergence Divergence (MACD) line remains in negative territory. These signals point to continued selling dominance, with nearby resistance likely to limit rebounds.

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

Any recovery attempt is likely to meet its first resistance in the $4,025-$4,030 horizontal band. A move above this area could prompt short covering and carry Gold towards the 100-period EMA near $4,093, followed by the channel’s upper boundary around $4,126. Together, these levels form a broader supply zone that would have to be reclaimed before bearish pressure could ease.

(An AI tool assisted in preparing the technical analysis in this story. Learn more.)

Fed: Frequently Asked Questions

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

Adjusting interest rates is the Federal Reserve’s (Fed) main means of pursuing its two mandates: price stability and full employment. As the institution responsible for shaping US monetary policy, it uses this tool to influence economic conditions. If prices rise too rapidly and inflation exceeds the Fed’s 2% target, it increases interest rates. Higher borrowing costs across the economy make the US more attractive to international investors, strengthening the US Dollar (USD). Conversely, inflation below 2% or an excessively high Unemployment Rate may prompt the Fed to cut interest rates to stimulate borrowing. Such a move puts pressure on the Greenback.

How frequently does the Fed meet to decide monetary policy?

Economic conditions are reviewed and monetary policy decisions taken by the Federal Open Market Committee (FOMC) at the Federal Reserve’s (Fed) eight policy meetings each year. Twelve Fed officials participate in the FOMC: all seven Board of Governors members, the Federal Reserve Bank of New York president and four presidents drawn from the other eleven regional Reserve Banks. Those four serve rotating one-year terms.

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

To revive the flow of credit in a stalled financial system, the Federal Reserve may turn to Quantitative Easing (QE) in extreme circumstances. This policy substantially expands credit availability. An unconventional measure reserved for crises or exceptionally low inflation, QE was the Fed’s preferred response during the 2008 Great Financial Crisis. Under it, the Fed prints additional Dollars to purchase high-grade bonds from financial institutions. The US Dollar usually weakens as a result.

How does Quantitative Tightening (QT) work, and what does it mean for the US Dollar?

By reversing QE through Quantitative tightening (QT), the Federal Reserve ceases bond purchases from financial institutions. It also allows its existing bond holdings to mature without reinvesting the principal in new bonds. This process generally supports the US Dollar’s value.