Gold trims intraday gains as Fed rate bets cap recovery
Held a modest intraday gain during Monday’s European session but struggled to stay above $3,900. A weaker US dollar and falling oil prices offered support…
Gold trims intraday gains and struggled to build momentum above $3,900 during the first half of Monday’s European session, as expectations of another US Federal Reserve rate increase limited the metal’s recovery.
The US dollar slipped to a one-week low, while lower oil prices eased inflation concerns and weighed on US bond yields. Those moves supported gold, but traders still saw a roughly 75% chance of another rate increase in December, according to CME Group’s FedWatch Tool.
Why are rate-hike bets weighing on gold?
Gold does not pay interest, so expectations of higher borrowing costs can make it less attractive relative to assets that offer a yield. The latest US economic data, released last Thursday, showed resilient growth and persistent price pressures, reinforcing expectations for further Federal Reserve tightening.
That outlook has constrained a recovery after gold fell below the $4,000 level on Friday. The metal remained near the October 2025 low touched that day, despite the softer dollar and falling bond yields.
The price move matters beyond trading screens: gold’s difficulty holding gains leaves consumers and businesses with little sign of a sustained rebound in the metal’s market price. The competing forces are also clear. Lower yields and a weaker dollar helped gold, while the prospect of higher US rates kept pressure on the non-yielding asset.
What is supporting the dollar and limiting gold’s rebound?
Optimism about a possible diplomatic breakthrough in the US-Iran war weakened demand for the dollar as a safe-haven asset. Iranian negotiators reportedly met Qatari mediators for a third consecutive day on Sunday to advance a deal.
Iran proposed a two-day, 48-hour plan to reopen the Strait of Hormuz, conditional on the US lifting sanctions imposed after the Islamabad memorandum and reducing its forces in the region. US President Donald Trump said negotiations were going fine and that Iran wanted a deal.
But Trump also said he had not ruled out further military action after the November 3 midterm elections. Iran’s Supreme Leader, Mojtaba Khamenei, ordered senior military commanders to prepare for a renewed confrontation with the US and Israel and broaden Tehran’s options for retaliation. Fresh Ukrainian attacks on Russian oil refineries added to geopolitical risks, tempering pressure on the dollar.
Which US data are traders watching?
The US ISM Manufacturing PMI was scheduled for release later Monday. The ISM Services PMI was due Wednesday, followed by the monthly employment report, known as the Nonfarm Payrolls report, on Friday.
Those releases could shape expectations for the Federal Reserve’s next move. The current market pricing puts the chance of a December rate increase at around 75%, leaving gold vulnerable to shifts in the rate outlook.
Technical indicators also reflected the strain. Gold traded below its 100-period exponential moving average on the four-hour chart, while the moving average convergence divergence indicator remained in negative territory. The relative strength index stood at 28.94, an oversold reading that suggested the latest decline may have stretched in the short term.
On the upside, the 100-period moving average at $4,068.55 was identified as a level gold would need to reclaim to ease the near-term bearish bias. On the downside, traders were watching Friday’s low near $3,870 for potential demand; a break below it could extend the decline.
