Gold recovers after Fed-led sell-off, but hawkish outlook caps gains

• Gold rebounds as the US Dollar and Treasury yields pull back following the Fed’s hawkish rate hike.
• The Fed’s dot plot signals more tightening ahead, which could keep XAU/USD’s recovery in check.
• Technically, XAU/USD tests the 100-day SMA after finding support near the 50-day SMA.

Gold (XAU/USD) rebounds on Thursday as the US Dollar (USD) eases after climbing to a seven-week high as traders assess the Federal Reserve’s (Fed) latest monetary policy announcement. A cooldown in the Oil rally also keeps US Treasury yields below their recent highs, lending additional support to the precious metal. At the time of writing, XAU/USD trades around $4,332, up 1.60% so far on the day.

The US central bank delivered its first interest rate hike since 2023 on Wednesday, unanimously lifting the federal funds target range by 25 basis points (bps) to 3.75%-4.00%. In its monetary policy statement, the Fed said economic activity is expanding at a solid pace, domestic spending is resilient and unemployment has changed little. Policymakers added that inflation is still elevated and that the rate increase should support a timelier return to the 2% target.

Following the decision, Gold reversed its intraday gains as the US Dollar and Treasury yields moved higher. Selling pressure increased as traders digested the updated interest rate projections and comments from Fed Chairman Kevin Warsh, pushing XAU/USD to $4,235, its lowest level since August 7.

The updated dot plot showed that 16 of 18 Fed policymakers expect at least one more quarter-point increase by the end of the year, while the median projection points to a policy rate of 4.1%. Warsh also struck a hawkish tone, saying inflation is too high and describing the hike as removing “a dose of accommodation,” as financial conditions showed little sign of being restrictive. He added that this view is “widely shared across the Committee,” suggesting that the Fed may be prepared to raise rates again in the coming months.

As a result, selling pressure on the US Dollar could stay limited, keeping Gold’s recovery in check. Higher interest rates usually weigh on the non-yielding metal by making interest-bearing assets more attractive. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 100.20, down 0.10% on the day. Meanwhile, the benchmark 10-year US Treasury yield holds near 4.98%, below the 5.04% level touched earlier this week, its highest since 2007.

Middle East developments also stay in focus. US President Donald Trump said Washington is “hopefully” nearing the end of the Iran war and claimed Tehran wants to reach a deal. However, tensions across the region remain elevated as Saudi Arabia and the Iran-backed Houthis trade strikes.

Technical analysis: XAU/USD faces resistance at 100-day SMA

On the daily chart, XAU/USD is hovering between its key moving averages and keeping the near-term tone neutral to slightly bearish. Spot holds above the 50-day Simple Moving Average (SMA) at $4,283 and is attempting to reclaim the 100-day SMA at $4,323, suggesting a market caught in short-term consolidation below medium-term trend resistance.

The Relative Strength Index (RSI) around 47 hints at subdued momentum, while the Moving Average Convergence Divergence (MACD) stays in negative territory, with the line below zero and the histogram still depressed, reinforcing a lack of bullish conviction.

On the topside, immediate resistance is defined by the 100-day SMA at $4,323, followed by the 200-day SMA at $4,540, before a more distant horizontal barrier emerges near $4,700.

On the downside, initial support is seen at the 50-day SMA at $4,283, ahead of a more structural floor at $4,150 and then $4,000. While price trades in a relatively tight band between the nearby 50-day and 100-day averages, a sustained break on either side of this corridor would likely set the next directional leg for Gold.

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