Gold rebounds from three-month low and retakes $4,000 on weak USD; focus remains on FOMC

Source Fxstreet
  • Gold gains some positive traction, snapping a two-day losing streak to a three-month low.
  • Declining US bond yields cap the attempted USD recovery and lend support to the bullion.
  • XAU/USD bulls seem cautious ahead of this week’s central bank events and the key US data.

Gold (XAU/USD) attracts some buyers at the start of a new week, moving back above the $4,000 psychological mark during the Asian session amid a broadly weaker US Dollar (USD). US President Donald Trump has ruled out immediate military action against Iran, triggering a modest pullback in crude oil prices. Furthermore, Federal Reserve (Fed) officials have signaled no urgency to raise interest rates immediately. Adding to this, the recent sharp pullback in US bond yields from multi-year highs keeps a lid on the attempted USD recovery from a three-week low and offers some support to the commodity. The precious metal, for now, seems to have snapped a two-day losing streak to a three-month trough, touched on Friday, though the upside potential seems limited.

S&P Global's flash US Manufacturing Purchasing Managers' Index (PMI) rose to 56 in October, hitting a 53-month high and beating estimates for a reading of 55.6. Meanwhile, the Services PMI matched forecasts and stood at 57.9, compared to 58.8 in September, while the Composite Output Index slipped to 57.6 from a five-year high of 58.4 in the previous month. Additional details revealed that the output price index moved up to 59.8, its highest reading since August 2022, suggesting that inflation could increase further and remain persistently high in the coming months. This comes on top of inflationary concerns stemming from elevated energy prices and underpins prospects for additional Fed tightening, which could keep a lid on any meaningful upside for the non-yielding Gold. .

In fact, crude oil prices jumped to the highest level since September 16 amid supply concerns driven by attacks in Saudi Arabia and tensions involving Iran. In the latest developments, the Iran-backed Houthis in Yemen vowed on Sunday that they will keep attacking Saudi Arabia's King Khalid Airport in Riyadh. Moreover, the stalled US-Iran talks keep the geopolitical risk premium firmly in play and could limit deeper losses for the safe-haven Greenback, warranting some caution before placing aggressive bullish bets on gold. Traders might also opt to move to the sidelines ahead of this week's key central bank events and important US macro releases – the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index on Thursday.

The focus, however, will be on the outcome of the two-day FOMC policy meeting on Wednesday. In the absence of updated economic projections, traders will closely scrutinize the accompanying rate statement and Fed Chair Kevin Warsh's comments during the post-meeting press conference for more cues on the future policy path, which will influence the near-term USD price dynamics. Meanwhile, the Reserve Bank of New Zealand (RBNZ), the European Central Bank (ECB) and the Bank of Japan (BoJ) are also scheduled to announce their rate decisions this week. This might further infuse volatility around the Gold price. Nevertheless, the aforementioned fundamental backdrop warrants some caution before confirming that the XAU/USD pair has bottomed out.

XAU/USD 4-hour chart

Chart Analysis XAU/USD

Technical Analysis

The precious metal maintains a bearish near-term tone following last week's breakdown through a short-term trading range support near the $4,100 mark. Moreover, the recent repeated failures to conquer the 100-period Exponential Moving Average (EMA) validate the negative outlook, suggesting that the attempted recovery remains corrective within a broader downside bias.

Hence, any subsequent move up is more likely to be sold into and remain capped near the $4,100 support-turned-resistance. The next hurdle is clustered around the 100-period EMA at $4,135.95. The XAU/USD pair would need a sustained move above the said barrier for any shift to a more constructive outlook and additional gains toward reclaiming the $4,200 mark.

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

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.

USD EUR GBP JPY CAD AUD NZD CHF
USD -0.17% -0.08% 0.00% 0.02% 0.09% -0.06% -0.15%
EUR 0.17% 0.13% 0.16% 0.20% 0.26% 0.15% 0.03%
GBP 0.08% -0.13% 0.04% 0.09% 0.14% 0.00% -0.10%
JPY 0.00% -0.16% -0.04% 0.04% 0.10% -0.04% -0.15%
CAD -0.02% -0.20% -0.09% -0.04% 0.06% -0.06% -0.16%
AUD -0.09% -0.26% -0.14% -0.10% -0.06% -0.13% -0.24%
NZD 0.06% -0.15% -0.01% 0.04% 0.06% 0.13% -0.10%
CHF 0.15% -0.03% 0.10% 0.15% 0.16% 0.24% 0.10%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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