FX.co ★ MMC | XAU/USD, GOLD

Gold (XAU/USD) faces fresh supply in the European session today, Tuesday, halting the prior day's modest rally from near a three-month low as the US Dollar (USD) strengthens. Nevertheless, gold is defending the $4,000 level, with players growing cautious and awaiting the results of the two-day FOMC meeting on Wednesday. US Federal Reserve (Fed) policymakers earlier indicated no need to raise interest rates immediately. However, speculators still see more than an 80% chance of another rate hike at the US central bank's next December meeting. Furthermore, inflation concerns from rising oil prices support expectations of further Fed tightening. Consequently, attention will be fixed on the policy statement that follows and the comments made by Fed Chairman Kevin Warsh in the post-meeting press conference, as no economic projections are expected to be released. Beyond that, the Advance US Q3 GDP and PCE Price Index numbers are expected to offer more clues about the Fed's future monetary policy stance. The latter is likely to play a pivotal role in guiding US Dollar (USD) price action and support non-interest-bearing gold. Ahead of the key central bank event and amid economic risks, any rebound in US government bond yields, after their recent decline to a three-week low and amid unrest in the Middle East, supports the safe-haven USD. The geopolitical risk premium remains in play amid stalled US-Iran talks and renewed attacks by Iran-aligned Houthis on Saudi Arabia. In fact, Houthis said on Monday they had attacked Saudi Arabia's East-West crude oil pumping stations and Riyadh airport. Adding to this, Lebanese armed group Hezbollah is reportedly preparing for a possible resumption of hostilities with Israel, dampening hopes of immediate stability in the region. This, in turn, favors USD bulls and suggests the path of least resistance for gold remains down. The yellow metal remains bearish in the near term after breaking out of a short-term range. In addition, the precious metal remains firmly below its 200-period Simple Moving Average on the four-hour chart, currently at $4,198.08, which serves as a key ceiling for price. At the same time, the Moving Average Convergence Divergence indicator is above zero and rising, while the Relative Strength Index is moving toward the mid-30s, recovering from oversold conditions. A slight recovery in momentum metrics suggests an attempt to correct losses, but not a trend change. Nevertheless, a break below $4,000 will be needed to confirm the likelihood of deeper declines. As for the upside, the first resistance is at the broken range area, around $4,065-$4,075. Next is the $4,100 level, beyond which XAU/USD may try to challenge the 200-period Simple Moving Average at $4,200. A break above this level would relieve overall downward pressure on the pair.