On Wednesday, gold (XAU/USD) paused its upward movement after failing to break above the 9-day exponential moving average (EMA) ahead of a key US central bank decision. Today, the Federal Reserve will announce the outcome of its monetary policy meeting, with the consensus forecast pointing to interest rates remaining unchanged. However, investors should pay attention to the accompanying policy statement and Fed Chair Kevin Warsh's remarks at the press conference.
US macroeconomic releases due on Thursday will also be important for the market, including the preliminary third-quarter GDP estimate and the Personal Consumption Expenditures (PCE) Price Index. These data could provide further insight into the likely path of Fed monetary policy. Interest rate expectations will remain a key driver of short-term US dollar movements and, consequently, gold prices.
According to the CME FedWatch Tool from CME Group, market participants assign a probability of more than 80% to a Fed rate hike in December. Inflation risks associated with high energy prices are also weighing on the precious metal, as they reinforce expectations of further monetary policy tightening.
The base-case scenario assumes that the Fed will pause in October and resume its tightening cycle in December. Strategists at BNY Markets share a similar view: "Like the market, we do not forecast a rate hike in October and expect further tightening to take place at the December meeting."
BNY also allows for internal disagreement within the Federal Open Market Committee (FOMC): "We expect at least one dissenting vote—and possibly more—in favor of raising interest rates." Analysts believe that one or two such dissenting votes could be interpreted by the market as a hawkish signal, strengthening expectations of higher borrowing costs before the end of the year.
Commenting on the upcoming press conference, experts note: "We do not expect any hints of a December rate hike, as Chair Kevin Warsh is not inclined to provide guidance on future monetary policy decisions. Nevertheless, we believe market expectations of a December rate hike will strengthen further."
A geopolitical risk premium remains embedded in gold prices amid the threat of escalating tensions in the Middle East. On Tuesday, The Wall Street Journal reported that the United States had informed several Arab states in the Persian Gulf that they should be prepared for a short but intensive military operation against Iran, which could potentially begin after the November 3 midterm elections.
Tensions increased further after Iran-backed Houthi forces in Yemen claimed to have carried out a direct ballistic missile strike on the Saudi Ministry of Defense building in Riyadh. The prolonged deadlock in US-Iran negotiations has also pushed crude oil prices higher and supported the US dollar as a safe-haven asset, keeping it near a two-week high. This has created an additional headwind for XAU/USD.
Nevertheless, gold buyers continue to attempt a break above the 9-day EMA. This price action makes it difficult for aggressive sellers to establish a clear advantage, although the overall fundamental backdrop still favors further downside, with corrective rebounds potentially attracting renewed selling interest.
From a technical perspective, XAU/USD is trading intraday just above the 100-hour exponential moving average (EMA) at $4,044.00. This level currently acts as short-term support and limits selling pressure.
The Relative Strength Index (RSI), at around 60, indicates only moderate bullish momentum. Meanwhile, the MACD histogram is declining toward zero, suggesting that the upward momentum may be fading as prices consolidate following the recent advance.
The inability of prices to establish themselves above $4,065 is another warning sign for gold buyers. A decisive break above this level could open the way for further recovery. On the other hand, a break below support at the 100-hour EMA could accelerate the decline toward $4,030, where the 100-hour simple moving average (SMA) is located. A deeper correction could bring prices toward the October low near $3,970.
