FX.co ★ XAU/USD, GOLD

Gold (XAU/USD) struggled to maintain its earlier rally after the start of Tuesday's European trading session, settling around the $4,200 level. The US dollar (USD) retreated slightly from its 18-month high, providing some temporary relief for the precious metal. However, continued safe-haven demand for the dollar and persistently high benchmark bond yields continued to limit gold's upside potential. Market expectations for central bank policy remain strongly skewed toward further monetary tightening. Minutes from the Federal Open Market Committee (FOMC) meeting in September confirmed that policymakers favor raising interest rates by another 25 basis points before the end of the year to address persistent price pressures. Comments from Cleveland Federal Reserve President Beth Hammack reinforced this hawkish stance. She emphasized that with overall weak demand and energy shocks, "inflationary thinking" could become deeply entrenched among businesses and consumers. Hammack's position, reflected in her hawkish rating, underscores that smaller, relatively quicker policy adjustments are preferable to delayed policy corrections. This situation reinforces market expectations of a potential interest rate hike and has supported the dollar as its value has declined. Geopolitical risks in the Middle East continued to support gold prices, boosting demand for the dollar as a safe haven. Tensions escalated after the deadly attack on King Khalid International Airport in Riyadh over the weekend, in which the Iranian-backed Houthis launched missile attacks on Saudi infrastructure. Saudi Arabia vowed a military response, and US President Trump hinted at the possibility of US participation in joint strikes against Houthi and Iranian targets. These factors combined to increase geopolitical risk premiums, keeping safe-haven flows active in global markets. However, the net impact on non-income-generating gold remained limited, as rising energy costs exacerbated overall inflation risks and reinforced the Federal Reserve's hawkish monetary policy stance, prompting investors to view higher gold prices as selling opportunities ahead of key US inflation data releases. Market participants remained cautious ahead of the release of the Consumer Price Index (CPI) on Wednesday and the Producer Price Index (PPI) on Thursday. These reports, along with Federal Reserve Chair Kevin Warsh’s upcoming speech in Bangkok, will provide key guidance on the timing of the next interest rate hike. Analysts at Société Générale noted that if the market widely expects the core Consumer Price Index (CPI) to reach 2.5%, this would effectively solidify expectations of a December rate hike, thus keeping real interest rates elevated.

Technically, on the four-hour chart, gold remains within a two-week consolidation range, exhibiting a bearish flag pattern after the pullback from the August highs. Spot prices remain trapped below the 100-day simple moving average (SMA) near $4,204, confirming the prevailing short-term bearish bias. Momentum indicators also reflect this hesitation: the MACD histogram is just below the zero line, indicating weak buying pressure. Meanwhile, the Relative Strength Index (RSI) hovers around 55, suggesting that prices are fluctuating below dynamic resistance levels, with a general bearish bias. Conversely, prices need to break through the resistance zone between $4204 and $4218, and the 61.8% Fibonacci retracement level at $4241, to alleviate the current selling pressure and open the way for higher Fibonacci retracement levels at $4328 and $4415, with an ultimate target of $4523 and a move closer to the cycle high of $4697. Meanwhile, initial structural support lies at the 78.6% Fibonacci retracement level at $4117. A decisive break below this level would confirm the resumption of the main downtrend and trigger a new round of technical selling, targeting the key swing low near $3959.