Gold Price Rises but Upside Remains Limited Amid Hawkish Fed Outlook
Gold prices extended their intraday recovery during the first half of the European session on Thursday, building on a rebound from the nearly six-week low reached a day earlier. A modest pullback in U.S. Treasury yields triggered some profit-taking in the U.S. dollar, offering support to the precious metal. However, a hawkish Federal Reserve outlook and escalating tensions in the Middle East are expected to limit further weakness in the safe-haven greenback and cap gains in non-yielding gold.
Gold Technical Outlook Remains Bearish
Despite the latest rebound, gold continues to maintain a short-term bearish bias below the key resistance zone between $4,315 and $4,320, which includes both the 50% Fibonacci retracement of the June–August rally and the 100-day Simple Moving Average (SMA).
This area is viewed as a critical pivot point. A sustained move above it could open the door for a rally toward the 38.2% Fibonacci retracement near $4,404, followed by the 23.6% retracement level at $4,513, and potentially the broader cycle high around $4,690.
On the downside, immediate support is located at the 61.8% Fibonacci retracement near $4,226. Additional support levels are seen at the 78.6% retracement around $4,100 and the previous swing low near $3,940.20.
Momentum indicators suggest bearish pressure is easing but remains intact. The MACD continues to trade in negative territory, with the signal line still below the MACD line, although the bearish histogram is narrowing. Meanwhile, the Relative Strength Index (RSI) is hovering near 44, indicating weakening downside momentum without yet signaling a reversal of the broader corrective trend.
Hawkish Fed Signals Further Tightening
The Federal Reserve unanimously approved its first interest-rate increase since 2023 at the conclusion of its September policy meeting on Wednesday. The decision matched market expectations and was accompanied by a more hawkish policy outlook.
The Fed’s updated dot plot showed policymakers anticipate at least one additional rate hike before the end of the year. Speaking after the meeting, Fed Chair Kevin Warsh said the decision was driven by continued strength in the U.S. economy, a lack of meaningful improvement in inflation trends over the summer, and ongoing geopolitical risks.
Warsh emphasized that inflation remains too high and has persisted for too long, underscoring the central bank’s commitment to restoring price stability. He also highlighted the inflationary risks posed by elevated energy prices, reinforcing expectations that further monetary tightening may still be necessary.
As a result, U.S. Treasury yields remain elevated, with the benchmark 10-year Treasury yield holding near the psychologically important 5.0% level, its highest reading since April 2007. Higher yields, combined with geopolitical uncertainty, continue to support the U.S. dollar.
Middle East Tensions Support Safe-Haven Demand
Geopolitical developments remain in focus after Iran-backed Houthi rebels claimed Saudi aircraft conducted more than 450 airstrikes across Yemen over the past week and alleged that a Saudi F-15 fighter jet was shot down over Marib province.
Meanwhile, U.S. President Donald Trump stated that Iran is seeking a deal and suggested the conflict could be approaching an end. Nevertheless, intensifying clashes between the Houthis and Saudi Arabia continue to fuel geopolitical risk premiums and support oil prices.
Rising energy prices and persistent geopolitical uncertainty are helping sustain demand for the U.S. dollar as a safe-haven asset, suggesting traders may remain cautious about expecting a sustained bullish breakout in gold prices in the near term.