Gold refreshes weekly low, below $4,450 as USD sticks to gains on Mideast risks, Fed bets
- Gold meets with a fresh supply on Wednesday amid fears that rates would stay higher for longer.
- Rising Oil prices fuel inflationary concerns, bolstering expectations for more hawkish central banks.
- Bets that the Fed will raise rates in 2026 support the USD, further weighing on the precious metal.
Gold (XAU/USD) continues to lose ground through the first half of the European session on Wednesday and slides back below the $4,450 level, hitting a fresh weekly low in the last hour. Renewed hostilities in the Middle East push Crude Oil prices higher for the third straight day, reviving inflationary concerns and reaffirming market bets that interest rates would stay higher for longer. This, in turn, undermines the non-yielding yellow metal. Furthermore, geopolitical uncertainties continue to underpin the US Dollar's (USD) reserve currency status, which is seen as another factor driving flows away from the commodity.
In the latest developments surrounding the Middle East crisis, the US military’s Central Command (CENTCOM) said its forces conducted “self-defence” strikes on Iran’s Qeshm Island. In response, Iran launched a series of missiles and drones on US military facilities in Kuwait and Bahrain, though US and Gulf air defence systems intercepted most of the attacks. Adding to this, fighting between Israel and Hezbollah has also intensified. Furthermore, the lack of a breakthrough in US-Iran diplomatic negotiations, amid a standoff over Tehran's nuclear program and the Strait of Hormuz, raises the risk of a further escalation of tensions in the region and keeps geopolitical risks in play.
Meanwhile, US Secretary of State Marco Rubio said that Washington will not remove sanctions on Iran in exchange for a full reopening of the Strait of Hormuz, adding that any sanctions relief is conditioned on Iran giving up enriched uranium. That said, US President Donald Trump announced the open-ended extension of the ceasefire and the continuation of a US blockade until negotiations are concluded "one way or the other.” This helps Crude Oil prices to move further away from a one-month low touched last Friday, deepening fears about inflation and bolstering expectations for a more hawkish stance by major central banks, including the US Federal Reserve (Fed).
Adding to this, Cleveland Fed President Beth Hammack said on Tuesday that the central bank remains firmly committed to getting inflation back to 2% and may need to act soon if inflation trends don't cool. Moreover, the CME Group's FedWatch Tool suggests that traders are now assigning over a 50% probability that the Fed will raise borrowing costs by 25 basis points (bps) at the December policy meeting. The outlook remains supportive of elevated US Treasury bond yields, underpinning the USD and contributing to a weaker tone surrounding the Gold price.
XAU/USD 4-hour chart
Gold's bearish technical setup backs the case for a further depreciating move
From a technical perspective, the XAU/USD pair maintains a bearish bias within a downward parallel channel and below the 200-period Exponential Moving Average (EMA) on the 4-hour chart. Meanwhile, the Relative Strength Index (RSI) hovers near 46, hinting at slightly negative but not oversold momentum. Moreover, the Moving Average Convergence Divergence (MACD) line has slipped back below zero with a negative reading, suggesting that recent attempts to stabilize are losing traction within the broader descending structure.
The setup suggests that any attempted recovery might continue to face initial resistance at the 200-EMA near $4,598.83. The upper boundary of the descending channel around $4,634.83 forms a secondary barrier that would need to be reclaimed to ease the current bearish tone. On the downside, the lower boundary of the channel near $4,322.55 offers the next significant support, and a clear break below this floor would reinforce the prevailing downtrend and open the way for deeper losses.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
