Gold (XAU/USD) edged up to about $4,140 in early Asian trade on Friday, rebounding from a two-month low as markets weighed the outlook for energy prices against an uncertain Federal Reserve rate path. US President Donald Trump said the US would not attack Iran before the midterm elections and described talks as “productive”, following reports that Washington had considered action ahead of November. Fed minutes showed policymakers were united behind the September increase, while most judged another move would likely be appropriate by year-end; Governor Christopher Waller echoed the need for further tightening but signalled flexibility on timing, including the option of an October pause. Pricing implies a 17.7% chance of an October hike, while a December increase is seen at 81.3%, a backdrop that can pressure a non-yielding asset such as gold.
Market gauges kept the policy tone hawkish, with an FXS Speechtracker score of 8/10 versus a 7.2/10 historical average, and the FXS Fed Sentiment Index up 0.42 to 138.34. Technically, gold remains capped below the 100-day SMA and the Bollinger middle band; the RSI stands at 39.99. Support is seen near $4,060, while resistance sits around $4,240 and $4,265, with a higher barrier near $4,420. In longer-term flows, central banks added 1,136 tonnes of gold worth around $70 billion in 2022.
Technical Outlook Remains Bearish Despite Gold’s Short-Term Rebound
We are currently watching gold hover around the $4,140 mark as it attempts to recover from its recent two-month low below $4,100. Despite this minor rebound, the overall technical picture remains bearish because the price is still trading below the 100-day simple moving average of $4,265. Derivative traders should proceed with caution in the coming weeks, as the market balances geopolitical relief against a hawkish Federal Reserve.
We must closely monitor interest rate expectations, as there is currently an 81.3% probability of a rate hike in December according to interest rate futures. High interest rates raise the opportunity cost of holding non-yielding gold, which is reflected in US 10-year Treasury yields remaining elevated above 4.1% this October. Because Fed policymakers are united in keeping monetary policy tight, any short-term rallies in gold will likely face heavy resistance.
Geopolitics and Central Banks: Short-Term Headwinds and Long-Term Support
Geopolitical tensions have temporarily eased after recent statements indicating no immediate military action in the Middle East before the November midterm elections. This reduction in the geopolitical risk premium has taken some of the immediate safe-haven bid out of the precious metal. We believe this temporary calm will keep gold prices capped in the near term, especially as diplomatic discussions continue.
From a technical perspective, we suggest watching the key support level at $4,060 and resistance near $4,240. Since the Relative Strength Index is sitting at 39.99, sellers still have the upper hand, but the market is not yet deeply oversold. If you are trading gold derivatives, selling rallies toward the $4,240 to $4,265 zone could be a viable strategy until a clear trend reversal occurs.
While the short-term outlook looks vulnerable, we should not ignore the strong long-term demand floor created by global central banks. Recent historical data from the World Gold Council shows that central bank buying has remained historically high, following the record 1,136 tonnes purchased in 2022 and sustained buying above 1,000 tonnes annually in subsequent years. This institutional support means that while we expect short-term downward pressure, a complete collapse in gold prices remains highly unlikely.
