Gold (XAU/USD) climbs back above the $4,300 mark heading into the European session on Thursday, though it remains within striking distance of a six-week low touched the previous day. The US Dollar (USD) eases after touching a fresh high since late July and offers some support to the commodity. However, the Federal Reserve's (Fed) hawkish outlook, along with escalating Middle East tensions, should continue to underpin the safe-haven and cap the non-yielding bullion.
The US central bank voted unanimously to raise interest rates for the first time since 2023 at the conclusion of the September policy meeting on Wednesday. The decision was in line with the broader consensus and was accompanied by a more hawkish outlook. In fact, the so-called dot plot revealed that Fed officials expect one more interest rate increase this year. At the post-meeting press conference, Fed Chair Kevin Warsh said that the decision was led by a strengthening US economy, a lack of improvement in summer inflation trends, and geopolitics.
Warsh added that inflation is too high and has been for too long, while underscoring the importance of stabilizing consumer prices to grow the US economy. Furthermore, inflation risks stemming from persistently high energy prices underpin prospects for further tightening by the Fed and remain supportive of elevated US bond yields. In fact, the yield on the benchmark 10-year US Treasury hovers near the 5.0% psychological mark and close to its highest level since April 2007. This, along with escalating tensions in the Middle East, could underpin the safe-haven USD.
In the latest developments, Iran-backed Houthi rebels said that Saudi aircraft have carried out more than 450 air strikes across Yemen in the past week and claimed that they shot down a Saudi F-15 fighter jet over Marib province. Meanwhile, US President Donald Trump claimed that Iran wants to strike a deal and that the war may be nearing its end. Nevertheless, intensifying fighting between the Houthi group and Saudi Arabia keeps the geopolitical risk premium in play, supporting oil prices. This favors USD bulls and warrants caution before positioning for further gains for the XAU/USD pair.
XAU/USD daily chart
Technical Analysis
The precious metal maintains a bearish near-term bias below the $4,315-$4,320 confluence – comprising the 50% retracement of the June-August upswing and the 100-day Simple Moving Average (SMA). The said area should act as a key pivotal point, above which the XAU/USD pair could climb to the 38.2% level near $4,404 and the 23.6% retracement at $4,513 en route to the broader cycle high zone at $4,690.
On the downside, immediate support is seen at the 61.8% Fibonacci retracement at $4,226, followed by the deeper 78.6% level at $4,100 and the structural floor around the prior swing low near $3,940.20. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator stays in negative territory with the line below its signal line and a contracting bearish histogram. The Relative Strength Index (RSI) hovers around 44, hinting at waning downside momentum but not yet challenging the prevailing corrective tone.
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