FX.co ★ XAU/USD, GOLD

On Thursday, gold (XAU/USD) experienced a strong sell-off for the third consecutive day, with its price falling below the $3,950 level during the first half of the European trading session. This sustained decline in the non-yielding precious metal is primarily driven by robust demand for the US dollar; US consumer inflation data, which exceeded expectations, has bolstered projections for an interest rate hike by the Federal Reserve, thereby continuing to support the dollar’s performance. Earlier this week, data from the US Bureau of Labor Statistics showed that the Consumer Price Index (CPI) rose by 0.4% month-on-month in October, while the core CPI increased by 0.3%. Both figures surpassed market forecasts, reinforcing expectations that the Federal Reserve will tighten its monetary policy at its scheduled December meeting. Several influential policymakers from the Federal Open Market Committee (FOMC) have made hawkish remarks—most notably Governor Christopher Waller, who warned that if core inflation reaches 0.3% or higher, a 50-basis-point interest rate hike would need to be considered to maintain the Federal Reserve's credibility. Consequently, the interest rate futures market has not only fully priced in a 25-basis-point hike but has also increased bets on a 50-basis-point increase. This reassessment of a hawkish outlook has pushed the yield on the benchmark 10-year U.S. Treasury note above 5%, increasing the opportunity cost of holding precious metals and providing strong fundamental support for the U.S. dollar. Analysts at Rabobank noted that the financial markets' reaction to the Federal Reserve’s hawkish stance has gone beyond mere interest-rate adjustments; traders have not only priced in a rate hike for December but have also shown no expectation of any political pushback against the Fed’s monetary tightening policy. The bank highlighted that ever since Federal Reserve official Kevin Warsh surprised the market with his highly hawkish tone at the Jackson Hole symposium in August, earlier concerns regarding the potential erosion of the Fed’s credibility have largely dissipated. Furthermore, Rabobank observed that the results of last week’s U.S. midterm elections have reduced the likelihood of significant pressure from the White House, bolstering investor confidence in the Federal Reserve policymakers' ability to independently pursue their monetary tightening agenda. Meanwhile, geopolitical turmoil in the Middle East continues to fuel demand for the U.S. dollar as a safe-haven asset, placing further downward pressure on gold prices. Tensions are escalating around the strategically vital Strait of Hormuz, following reports of a U.S. raid on the Iranian island of Qeshm—an action to which Iran responded by targeting navigation systems near the island of Didamar, at the entrance to the Persian Gulf. Furthermore, high-ranking Iranian military officials have announced that the waterway will remain closed unless the supreme leadership issues orders to the contrary.

The combined impact of monetary policy and geopolitical factors has pushed the US Dollar Index (DXY) to its highest level since April 2025. This confirms that the structural trend for the XAU/USD pair remains firmly bearish, suggesting that any attempted rebound will likely encounter strong selling pressure. Market participants are currently closely monitoring upcoming US weekly initial jobless claims data and scheduled speeches by Federal Reserve officials for further guidance; they also remain wary of any sudden geopolitical developments that could trigger significant volatility in asset prices. From a technical analysis perspective, on the one-hour chart, gold prices remain in a clear short-term downtrend. Previously, gold faced resistance at the 100-hour exponential moving average (around $4,044) before falling below the 50% Fibonacci retracement level and settling beneath the psychological $4,000 mark. Although the Moving Average Convergence Divergence (MACD) indicator has moved slightly into positive territory, and the 14-period Relative Strength Index (RSI) is hovering around 31—having exited the oversold zone—these signals merely indicate a temporary stabilization within the downtrend, rather than a confirmed bullish reversal. Currently, gold prices have immediate technical support at the 61.8% Fibonacci retracement level (approximately $3,976). A break below this level would point toward deeper structural support at the 78.6% Fibonacci retracement level (around $3,930) and the 100% Fibonacci retracement level (around $3,870). At these levels, buyers might attempt to defend the overall trend. Conversely, any corrective rebound would face immediate resistance at the 50% Fibonacci retracement level ($4,009). Further resistance arises from intense selling pressure at the 38.2% Fibonacci retracement level ($4,041) and the 100-period Exponential Moving Average (EMA, at $4,044). A breakout above these levels could lead to further gains toward the 23.6% Fibonacci retracement level ($4,082) and resistance near the cycle high ($4,147).