Gold declines below $4,150 as rising Fed hike expectations outweigh US-Iran deal hopes
- Gold price drifts lower to around $4,125 in Tuesday’s early Asian session.
- Markets price in an 84% chance of a Fed rate hike in December.
- Trump says further airstrikes on Iran won’t be necessary.
Gold price (XAU/USD) loses ground to near $4,125 during the early Asian trading hours on Tuesday. Rising bets of further US interest rate hikes following a stronger-than-expected US Nonfarm Payrolls (NFP) report weigh on the precious metal. Traders will closely monitor the developments surrounding the US-Iran peace deal to end the war for fresh impetus.
The upbeat US jobs data released last week has reinforced expectations that the Federal Reserve (Fed) could keep interest rates higher for longer. The US economy added 165,000 jobs in October, compared to 60,000 recorded in September, beating estimates.
Meanwhile, the unemployment rate fell to 4.1% in October. Higher interest rates increase the opportunity cost of holding non-yielding gold, making gold less attractive to investors.
Traders currently see around an 84.0% probability that the Fed will raise rates in December, compared with 72.8% before the US jobs report, according to the CME FedWatch tool.
On the other hand, falling crude oil prices could ease inflation concerns and help limit the yellow metal’s losses. Oil dropped sharply after US President Donald Trump downplayed the likelihood of renewed strikes on Iran, though attacks on ships near the Strait of Hormuz kept supply concerns in focus.
Gold shines as risk-off tone weighs on equities and yields
Analysts at Deutsche Bank observe that credit markets were “fairly flat on both sides of the Atlantic,” but note that the “risk-off tone in equities meant it was a good week for gold, which was up +5.06% (-0.42% Friday) in its best week since August.” They add that “along with the risk-off tone from the AI selloff,” this shift in sentiment “helped to bring down sovereign bond yields around the world.” Even so, Deutsche Bank points out that “the 10-year US Treasury yield is up +1bps at 4.87% and Brent down around a percent as I type,” underscoring how the defensive bid for gold has emerged against a backdrop of mixed moves across other major asset classes.
Technical Analysis: Gold remains capped under the 100-day SMA
In the daily chart, XAU/USD remains capped in the near term, with spot holding below the 100-day Simple Moving Average (SMA) while still trading above the 20-day Bollinger middle band support. This configuration suggests a corrective bounce within a broader consolidation, as the Relative Strength Index (RSI) around 52 points to only modest positive momentum rather than a decisive bullish breakout.
On the topside, initial resistance is seen at the 100-day SMA around $4,200, with a stronger barrier at the upper Bollinger band near $4,225; a daily close above this cluster would be needed to reopen the path toward higher highs. On the downside, immediate support is provided by the Bollinger middle band at approximately $4,065, ahead of the lower Bollinger band near $3,900, where a break would expose a deeper corrective phase toward earlier cycle lows.
(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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