Gold gains ground to near $4,150 as traders weigh Fed rate path
- Gold price drifts higher to near $4,140 in Friday’s early Asian session.
- Trump said the US won’t attack Iran before the midterm elections.
- Traders see 17% odds of a Fed rate hike in October.
Gold price (XAU/USD) edges higher to around $4,140 during the early Asian session on Friday. The precious metal rebounds from a two-month low as traders assess the outlook for energy prices and weighed the Federal Reserve's (Fed) uncertain interest-rate path.
US President Donald Trump said the US won’t attack Iran before the midterm elections. Trump added that Washington was also having “productive discussions” with Iran, without offering details. The remarks followed a recent report that the White House was considering striking Iran ahead of the November midterms.
Minutes from the last Federal Reserve (Fed) meeting showed policymakers united in backing their September hike, and most officials assessed that another hike would be appropriate by year-end.
“With regard to the outlook for monetary policy beyond the current meeting, most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,” the Minutes stated.
Fed Governor Christopher Waller said on Thursday that further rate hikes would likely be needed, but added there was "flexibility" about the pace of increases and left the door open for a pause in October.
According to the CME FedWatch tool, traders see a 17.7% probability of an October rate hike but are pricing in an 81.3% chance of a December increase. It’s worth noting that rising interest rates and higher yields on Treasuries typically weigh on gold as they raise the opportunity cost of holding the non-yielding asset.
Gold underperforms as copper holds near record highs
Analysts at Scotiabank highlight a divergent tone across the complex, noting that “metals are mixed, with copper remaining range bound at its record high as gold continues to look vulnerable following Wednesday’s break to a fresh local low under $4100/oz reaching levels last seen in early August.” The bank underscores that the latest move leaves gold looking particularly exposed, even as copper consolidates near its peak.
Waller’s flexible hike stance keeps Fed tone firmly hawkish
Fed’s Waller delivered a distinctly hawkish message, with an FXS Speechtracker score of 8/10, notably stronger relative to the historical average of 7.2/10. The insistence that “more hikes [are] needed” while allowing that they need not come at consecutive meetings signals a preference for a higher terminal rate with tactical flexibility on timing, reinforced by concern over persistent inflationary forces from AI investment and energy shocks and a strengthening economy in the second half of 2026. Emphasis on inflation running close to 5-1/2 years above target and the risk to inflation expectations, alongside a “solid and stable” labor market, underscores a bias toward further tightening even as Waller advocates using signaling rather than rigid forward guidance to steer markets.
The FXS Fed Sentiment Index rose by 0.42 points to 138.34, confirming that the overall Fed communication remains deep in hawkish territory according to the FXS Speechtracker framework. The combination of a higher-than-baseline speech score and an index level far above the neutral 100 mark suggests markets should continue to price a stronger Dollar bias and elevated Fed rate expectations despite the newly emphasized flexibility in the pace of future hikes.
Technical Analysis: Gold remains capped under the 100-day SMA
In the daily chart, XAU/USD remains under pressure as price holds below the Bollinger middle band and the 100-day simple moving average (SMA), keeping the near-term bias bearish despite the recovery off recent lows. The Bollinger upper band marks a more distant cap, while the Relative Strength Index (RSI) at 39.99 stays below neutral, hinting that sellers still retain the upper hand even as oversold conditions are avoided.
On the downside, immediate support emerges at the lower Bollinger band near $4,060, where a firmer bounce would be needed to ease bearish pressure. On the topside, initial resistance is located at the Bollinger middle band around $4,240, followed by the 100-day SMA at $4,265, with the Bollinger upper band at $4,420 acting as a stronger barrier if buyers attempt a deeper corrective move.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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