Gold declines on hawkish Fed and Dollar strength

Gold (XAUUSD) initially showed signs of strength but quickly lost momentum as market sentiment shifted. Hawkish signals from Federal Reserve officials weighed on the outlook for near-term easing, boosting the Dollar and pressuring gold. Meanwhile, delayed economic data and recent government disruptions added to market uncertainty. This environment has limited gold’s upside and added to near-term instability.

Gold slips as Fed holds firm and Dollar gains ground

Gold began the week on a positive note but soon gave up gains as market focus shifted to cautious remarks from Federal Reserve officials. Several FOMC members, including Kansas City Fed President Jeffrey Schmid, pushed back against immediate rate cut expectations. Schmid warned that inflation remains too high and that policy should remain restrictive. His tone reflected broader Fed caution, suggesting limited scope for near-term easing. This hawkish sentiment reduced the probability of a December rate cut below the 50% threshold, pressuring gold.

At the same time, the US Dollar found support as markets adjusted interest rate expectations. As hopes for immediate Fed easing faded, the Dollar regained strength. A stronger Dollar raises the cost of gold for international buyers, adding pressure on the metal. With major economic reports still pending, markets face greater uncertainty around Fed policy.

Despite these headwinds, underlying macroeconomic stress continues to offer support to gold at lower levels. Recently, the US government shutdown disrupted data flow and raised concerns about economic momentum. As a result, market participants remain cautious, awaiting this week’s FOMC meeting minutes and the upcoming economic reports to gauge the Fed’s direction. The effects of the shutdown, combined with softer data, could still shift sentiment back toward easing and help limit gold’s downside in the short term.

Gold consolidates within broadening wedge after pullback

The gold chart below shows a notable pullback from recent highs. Price action has formed an expanding wedge pattern, characterized by wider swings and increasing volatility. Gold failed to sustain its upward move and reversed, indicating a shift in near-term sentiment. This change in tone has allowed sellers to take control of short-term price action.

Notably, support near $4,000 has emerged as a critical level to watch. This zone aligns with the lower boundary of the wedge and has previously acted as a pivot during earlier consolidations. While the price briefly dipped below recent support, it managed to stabilize above wedge support, indicating that technical buying interest remains intact. If the wedge pattern continues to hold, gold may consolidate around this zone before attempting another upward move.

Additionally, the intermediate resistance sits near $4,150, where the price broke down earlier this week. A close above this level would be required to restore bullish momentum and potentially target a retest of the $4,370 peak. However, failure to hold the $4,000 area could trigger deeper downside toward the wedge base or prior breakout zones. For now, gold is trapped within a widening range, reflecting both macro indecision and technical compression.

Conclusion: Gold awaits data cues as macro and technical pressures build

Gold remains caught between opposing forces as macro uncertainty and technical pressures shape its path. While Dollar strength and Fed caution continue to limit upside, underlying economic risks and support above key levels are helping to stabilize price action. The next move will depend on upcoming data and policy signals, which could determine whether gold regains momentum or continues to consolidate.

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