Gold drifts lower as traders look to US CPI report for Fed rate cues amid Iran uncertainty
- Gold attracts some sellers on Tuesday as geopolitical risks and Fed hike bets support the USD.
- The downside seems limited as traders await the release of the US consumer inflation figures.
- The constructive technical setup backs the case for the emergence of dip-buying at lower levels.
Gold (XAU/USD) meets with fresh supply during the Asian session on Tuesday, reversing a part of the previous day's strong move up to the $4,150 resistance zone amid a modest US Dollar (USD) uptick. Against the backdrop of firming US Federal Reserve (Fed) rate hike expectations, mixed signals regarding the state of diplomatic talks between the US and Iran offer some support to the safe-haven Greenback. However, USD bulls seem hesitant and opt to wait on the sidelines ahead of US consumer inflation figures.
In the latest developments around the Middle East crisis, US President Donald Trump said that there is positive momentum towards ending the war on Iran, and that a resumption of strikes is quite unlikely, declaring the conflict effectively over. However, Mohsen Rezaei, Secretary of Iran’s Supreme National Security Council, dismissed reports of active negotiations as fake news and reiterated that Washington must accept Tehran's seven conditions to end the conflict. This keeps the geopolitical risk premium in play and underpins the USD, which, in turn, is seen exerting some downward pressure on the Gold price.
Meanwhile, the US Nonfarm Payrolls (NFP) report showed last Friday that employment rose by 165K in October, surpassing even the most optimistic estimates. Moreover, the readings for August and September were revised upward by a combined 84K. Adding to this, a downtick in the Unemployment Rate to 4.1% signaled continued resilience in the economy and underpins prospects for additional Fed tightening. According to the CME Group's FedWatch Tool, traders are currently pricing in over an 80% chance that the US central bank will raise borrowing costs in December, which further supports the Greenback.
Traders, however, opt to wait for more cues about the Fed's future policy path. Hence, the focus will remain glued to the release of the latest US Consumer Price Index (CPI) report, which will play a key role in influencing the USD price dynamics and provide some meaningful impetus to gold. Hence, it will be prudent to wait for some follow-through selling before confirming that the XAU/USD pair's recent recovery from the $3,870 region, or the lowest since September 2025, touched last month, has run its course and positioning for the resumption of the depreciating move witnessed over the past two months or so.
XAU/USD 4-hour chart
Technical Analysis
The XAU/USD pair holds a constructive near-term bias following the recent breakout above the 100-period and 200-period Simple Moving Averages (SMAs) on the 4-hour chart. Moreover, momentum indicators stay mildly positive, with the Relative Strength Index hovering near 57 and the Moving Average Convergence Divergence (MACD) just above the zero line. This suggests that upside pressure remains intact while not yet overstretched.
Hence, any subsequent slide could find immediate support near the 200-period SMA at $4,103 and the 23.6% Fibonacci retracement at $4,059, while the 100-period SMA around $4,042 forms a deeper cushion that would need to hold to preserve the current bullish structure. On the topside, initial resistance is seen at the 38.2% Fibo. level near $4,180, ahead of the 50.0% retracement around $4,279 and the 61.8% Fibo., close to $4,377, which together outline the next bullish objectives if buyers extend the advance.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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