XAU/USD – Price Analysis and Forecast: December Fed Rate Hike Expectations Weigh on Gold Prices

Gold (XAU/USD) started the new week below the psychologically important $4,000 level and subsequently moved above it. However, bearish sentiment continues to dominate the market. Although recent statements by Federal Reserve (Fed) officials indicated that there was no urgent need to raise interest rates, market participants still estimate the probability of monetary policy tightening in December at around 80%. Inflation risks, which have intensified amid rising oil prices, are providing additional support for expectations of further rate hikes. This is limiting the precious metal's recovery potential.

Crude oil prices came close to their May highs on Friday as investors grew concerned about potential supply disruptions amid escalating tensions in the Middle East. The confrontation between Saudi Arabia and Yemen's Iran-backed Houthi movement has intensified considerably, with militants using drones and missiles to attack airports and strategically important energy infrastructure in the kingdom. In addition, Iran's Islamic Revolutionary Guard Corps (IRGC) warned that, if the United States launches further strikes, Tehran could invade neighboring countries and attack facilities used by US military personnel. These statements are viewed as part of Iran's new offensive strategy.Markets are also facing additional pressure from reports that the United States and Israel have prepared plans for a short but large-scale military operation against Iran following the US midterm elections. This information is supporting the geopolitical risk premium. At the same time, hawkish expectations regarding future Fed decisions are helping the US dollar, a traditional safe-haven asset, recover after falling to a three-week low. This creates an additional headwind for gold.

Traders are likely to avoid opening new directional positions until clearer signals emerge regarding the Fed's monetary policy outlook. Consequently, attention will focus on the two-day meeting of the Federal Open Market Committee (FOMC), with the outcome due to be announced on Wednesday of the coming week. The market currently expects interest rates to remain unchanged. As no updated economic projections are scheduled, investors will analyze the wording of the accompanying statement, as well as comments from Fed Chair Kevin Warsh during the press conference.

In addition, preliminary US third-quarter GDP figures and the Personal Consumption Expenditures (PCE) Price Index will be released on Thursday. The PCE Price Index is one of the key inflation indicators used by the Federal Reserve. These releases could significantly affect the dollar's performance and provide a new catalyst for gold prices.

From a technical perspective,

The recent break below the lower boundary of the short-term trading range, followed by prices holding below the $4,100 and $4,065 levels, has provided a significant signal in favor of XAU/USD sellers. The Relative Strength Index (RSI) stands at 34.00, close to oversold territory, while the MACD indicator also remains in negative territory. This configuration indicates continued selling pressure despite some signs of stabilization.

At the same time, the precious metal has shown relative resilience below the psychological $4,000 level, so opening new short positions requires increased caution. Any recovery attempt is likely to encounter selling pressure and could stall in the 4,065–4,041 level. This zone previously acted as support within the trading range but has now turned into resistance.

The next reference level is the psychologically important $4,100 mark. A decisive break above it could trigger the closure of short positions, pushing gold toward intermediate resistance in the 4,155–4,170 area, followed by the $4,200 level. To confirm a sustained short-term recovery, prices would need to establish themselves firmly above $4,200.