$4,000 reclaimed: Gold recovers from three-month low as USD weakens; FOMC stays in focus

• Three-month lows give way to a modest Gold rebound, ending a two-day decline.
• Bullion finds support as lower US bond yields restrain the USD recovery attempt.
• With central bank decisions and key US data due this week, XAU/USD bulls remain cautious.

Gold (XAU/USD) has regained the $4,000 psychological level. Buyers returned at the start of the week during Asian trading as the US Dollar (USD) weakened broadly. A modest retreat in crude oil prices followed US President Donald Trump's decision to rule out immediate military action against Iran. Federal Reserve (Fed) officials have also indicated that an immediate interest rate rise is not urgent. Meanwhile, a sharp recent retreat in US bond yields from multi-year highs is constraining the USD's attempted rebound from a three-week low, providing some support for bullion. For now, the precious metal appears to have ended the two-day decline that took it to a three-month low on Friday. Scope for further gains nevertheless looks limited.

S&P Global's preliminary US Manufacturing Purchasing Managers' Index (PMI) reached a 53-month high of 56 in October, exceeding the 55.6 estimate. At 57.9, the Services PMI met expectations but eased from September's 58.8. The Composite Output Index also declined, registering 57.6 after the previous month's five-year high of 58.4. The details showed the output price index rising to 59.8, its strongest reading since August 2022. This suggests inflation could climb further and remain stubbornly elevated over the coming months. Together with inflation concerns linked to high energy prices, the figures support expectations of further Fed tightening, potentially restricting any substantial advance in non-yielding Gold.

Supply fears linked to attacks in Saudi Arabia and tensions involving Iran had, in fact, lifted crude oil prices to their highest since 16 September. On Sunday, Yemen's Iran-backed Houthis pledged to continue attacks on Saudi Arabia's King Khalid Airport in Riyadh. With US-Iran talks also stalled, the geopolitical risk premium remains firmly in place. That could cushion the safe-haven Greenback against deeper declines, calling for caution over aggressive bullish positions in gold. Traders may also stay on the sidelines before this week's major central bank events and US economic releases. Thursday brings the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index.

Wednesday's conclusion of the two-day FOMC policy meeting remains the main focus. With no updated economic projections due, traders will examine the accompanying rate statement and Fed Chair Kevin Warsh's remarks at the post-meeting press conference for guidance on the policy outlook. Those signals will shape near-term USD price movements. Rate decisions are also due this week from the Reserve Bank of New Zealand (RBNZ), the European Central Bank (ECB) and the Bank of Japan (BoJ), potentially adding to Gold price volatility. Against this fundamental backdrop, however, it remains prudent to be cautious before concluding that XAU/USD has established a bottom.

4-hour chart: XAU/USD

$4,100 Breakdown Keeps Near-Term Outlook Bearish

Last week's breach of short-term trading range support around $4,100 leaves the precious metal with a bearish near-term bias. Repeated recent attempts to clear the 100-period Exponential Moving Average (EMA) have also failed, reinforcing the negative outlook. The recovery attempt therefore appears corrective within a broader downward trend.

Further advances are consequently more likely to attract selling, with former support near $4,100 expected to act as resistance and cap gains. Beyond that, the next resistance area centres on the 100-period EMA at $4,135.95. A sustained break above this barrier would be needed to improve the XAU/USD outlook and open the way for further gains towards $4,200.

(The technical analysis of this story was written with the help of an AI tool. Know more.)