FX.co ★ XAU/USD, GOLD

The gold price (XAU/USD) falls below $4,100 on Thursday as the US Dollar (USD) bounces back, and inflation pressure due to increased oil prices in the Middle East region makes it more certain that interest rates will stay high for a long time. As per the latest trading, XAU/USD stands at $4,059, which is the lowest level seen since August 5. According to The New York Times, plans for the strike against Iran have been devised by the US and Israel, which will take place after the mid-term elections in the US. On the other hand, conflict between Saudi Arabia and the Houthis keeps rising as they attacked Saudi Arabia's Shaybah oil field and King Fahd International Airport. The US State Department has directed non-emergency staff of the government, along with their families, to evacuate Saudi Arabia. Latest geopolitical developments have increased fears of more disruption to oil supplies from the Middle East, causing prices to rise. WTI crude oil rises back towards $100 per barrel, increasing by 1.40% today and hovering around five-week highs. With the ongoing energy crisis making inflation exceed central bank targets in developed countries, authorities are forced to increase borrowing costs. An increase in interest rates decreases the appeal of gold because of its lack of yield, despite being a safe-haven investment and hedge against inflation. The longer the war continues, the longer central banks are likely to maintain their tightening monetary policies. Market participants are now looking forward to next week's Fed meeting, during which the US central bank is expected to keep interest rates steady after the last hike of 25 basis points (bps) in September. Traders will be paying attention to hints regarding the trajectory of future interest rate hikes by the Fed, given that markets have priced in another hike in December, according to the CME FedWatch Tool (89%). These hawkish expectations ensure that the demand for buying the US Dollar remains strong after its pullback from highs seen over several months due to declining US Treasury yields amid worries about investments in the AI sector affecting equities. The US Dollar Index (DXY), which measures the performance of the US Dollar relative to a basket of six major currencies, is currently trading near 101.78 after reaching a three-week low of 101.45. The benchmark 10-year US Treasury yield is at about 5.04%, down more than 1% on a daily basis. At the daily time frame, XAU/USD is testing the lower Bollinger Band at $4,069 while trading below the 20-period SMA, which serves as the middle Bollinger Band at $4,153, putting a bearish tone on the short-term outlook. The Relative Strength Index remains in the mid-high 30s, signaling some residual bearish pressure. At the same time, the MACD is slightly positive but turning over, indicating that the latest rebound has lost steam. Resistance to the upside starts with the 20-period SMA at $4,153, followed by the upper Bollinger Band at $4,237. An upside breakout from here would allow prices to extend toward $4,400 before reaching the $4,500 psychological level. However, on the negative side, the first support can be seen at the bottom Bollinger Band of $4,069. A breakdown below that could bring in the key psychological level of $4,000 and the June lows of $3,950.