FX.co ★ MMC | XAU/USD, GOLD

Gold (XAU/USD) initiates a minor rebound from three-month lows and holds on to its gains above the key level of $4,000 through the initial hours of the European trading day on Monday. At the moment, it appears that the precious metal has ended its two-day losing streak; however, there seems to be no buying interest in gold despite an unappealing outlook. While Fed policymakers indicated recently that they don't see any rush in hiking interest rates, market participants expect a rate increase this year with 80% probability. Moreover, geopolitical concerns provide support to the safe-haven dollar, which is likely to weigh on the metal. S&P Global's US manufacturing PMI climbed to 56 in October, reaching its 53-month high and topping projections of 55.6. On the other hand, the services PMI was on par with expectations and was recorded at 57.9, lower than 58.8 in the previous month, whereas the composite output index fell to 57.6 from its five-year high of 58.4 recorded last month. Further, the details showed that the price index climbed to 59.8, recording its highest level since August 2022, indicating that inflation can move higher in the future. In addition to the existing inflation worries due to high energy prices, this factor will boost the prospect of further monetary tightening by the Fed and limit the upside for non-yielding gold. Indeed, crude oil prices climbed to their highest level since September 16 in relation to supply worries stemming from attacks in Saudi Arabia and tensions in Iran. The latest developments involve the Iran-backed Houthis in Yemen, who have promised on Sunday to continue launching attacks against the King Khalid Airport of Saudi Arabia in Riyadh. Besides, the failed talks between the US and Iran increase the geopolitical risk premium and restrict further declines for the safe-haven Greenback. Thus, some consideration should be taken before entering into aggressive bullish trades on gold. Another option for traders could be sitting tight for this week's major central bank events and US macroeconomic data – the Advance Q3 GDP and PCE Price Index. The emphasis, nonetheless, would be on the result of the two-day meeting of the Federal Open Market Committee (FOMC) on Wednesday. Without new economic projections, it is expected that market players will pay keen attention to the rate statement that comes with the meeting and comments made by Fed Chairman Kevin Warsh at the press conference after the FOMC meeting. It is important to mention that the RBNZ, ECB and BoJ will release their interest rate decision announcements this week too. It may add another layer of volatility in Gold prices. Nonetheless, the fundamental scenario described above requires caution before it is confirmed that XAU/USD is making a bottom. The precious metal retains its bearish short-term bias after failing to hold above the support level around the $4,100 zone in the prior week's trading range breakout. What's more, the failure of the precious metal to move past the 100-period Exponential Moving Average (EMA) adds credence to the bearish sentiment, with the attempt at recovery seen as corrective within a bigger downtrend. Therefore, any rally going forward will likely run out of steam and be capped around the $4,100 resistance-turned-support level. The next resistance lies around the 100-period EMA of $4,135.95. The gold price needs a break above the noted resistance level to switch to a bullish bias in favor of gains back towards $4,200.