• Gold adds to the previous day’s heavy losses and slides back closer to the monthly low.
• Oil-driven inflation fears bolster Fed hike bets, exerting pressure on the precious metal.
• Declining US bond yields weigh heavily on the USD, although they fail to support the bullion.

Gold (XAU/USD) remains under heavy selling pressure for the second straight day, trading below the $4,000 psychological mark heading into Friday’s European session amid hawkish US Federal Reserve (Fed) expectations. US macro data on Thursday pointed to resilient economic growth and persistent price pressures, solidifying bets of an imminent Fed rate hike in December. This, in turn, is seen as undermining the non-yielding bullion and backing the case for further depreciation.

The preliminary estimate of third-quarter Gross Domestic Product (GDP) showed the US economic growth accelerated to an annualised rate of 3.4%, up from 2.2% in the previous quarter and beating the consensus forecast for a reading of 3.2%. Adding to this, the US Commerce Department reported that the Personal Consumption Expenditures (PCE) Price Index rose 0.5% in September and was up 3.6% from a year ago. Moreover, the core gauge, which excludes volatile food and energy prices, rose 0.3% and 3.1% on a monthly basis and yearly basis, respectively. This comes on top of inflationary concerns stemming from elevated US bond yields and underpins prospects for further policy tightening by the Fed.

Meanwhile, US Treasury yields tumbled as investors rushed into safe-haven government bonds after weak tech earnings raised concerns that rising AI spending may not deliver sufficient returns. Moreover, reviving hopes for a diplomatic solution to end conflicts in the Middle East dragged the safe-haven US Dollar (USD) lower for the third straight day, although it does little to ease the bearish pressure surrounding gold. In the latest developments, US Vice President JD Vance sent a direct letter to the secretary of Iran's Supreme National Security Council, Mohsen Rezaei, in an effort to restart peace negotiations. Furthermore, Qatar presented Iran with a new draft deal to end the war with the US and Israel.

However, investors remain wary amid escalating hostilities between the Iran-backed Houthi group in Yemen and Saudi Arabia. Furthermore, threats from the US and Israel to restart attacks after the US midterm elections keep the geopolitical risk premium firmly in play. Meanwhile, Iran's navy claimed Thursday that four oil tankers had struck sea mines in the Strait of Hormuz, adding to supply disruption worries and supporting oil prices. This backs the case for the emergence of USD dip-buying, suggesting that the path of least resistance for gold is to the downside and any recovery is likely to be sold into. Nevertheless, the XAU/USD pair remains on track to register a monthly loss of around 3.5%.

XAU/USD 4-hour chart

Technical Analysis

The precious metal extends its slide within a well-defined downward parallel channel, maintaining a negative near-term bias. Adding to this, the commodity trades below the 100-period Exponential Moving Average (EMA) on the 4-hour chart, which reinforces the bearish structure and should act as dynamic resistance overhead. Meanwhile, momentum indicators further validate the negative tone, with the Relative Strength Index (RSI) hovering near 35 and the Moving Average Convergence Divergence (MACD) line in negative territory. This, in turn, suggests that selling pressure remains dominant while rebounds are likely to be capped by nearby resistance.

On the downside, weakness below the previous monthly swing low, around $3,975, would expose the next notable support marked by the lower boundary of the descending parallel channel, around $3,946. A decisive break beneath this floor would be seen as a fresh trigger for bearish traders and open the door to deeper losses in the coming sessions.

On the topside, any attempted recovery is more likely to confront initial resistance at the $4,025-$4,030 horizontal zone, above which a bout of short covering could lift the Gold to the 100-period EMA around $4,093, ahead of the channel’s upper boundary near $4,126, forming a broader supply zone that would need to be reclaimed to ease bearish pressure.

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

Interest rates FAQs

Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.