Key Takeaways
- Gold (XAU/USD) is trading around $3,980 after a volatile session influenced by the Federal Reserve’s interest rate decision and outlook.
- The Federal Reserve implemented a 25-basis-point rate cut as expected, but Fed Chair Jerome Powell’s cautious remarks about future cuts created uncertainty.
- A one-year trade truce between the US and China has eased some market tensions, though ongoing geopolitical and economic uncertainties persist.
- Technical analysis shows XAU/USD consolidating below $4,000, with immediate resistance around the 21-period SMA near $3,982 and support at the $3,900 level.
Gold Price Action Amid Fed Uncertainty
Gold (XAU/USD) has stabilized on Thursday following a period of significant volatility, as traders assess the implications of the Federal Reserve’s recent interest rate decision and its cautious monetary policy outlook. At the time of reporting, XAU/USD was trading near the $3,980 mark, having briefly tested the significant $4,000 psychological level. This indicates a daily increase of approximately 1.20%.
On Wednesday, the Federal Reserve executed its second consecutive 25-basis-point rate cut, described as a risk-management move, which was largely in line with market expectations. However, with the rate cut already factored into market pricing, the focus shifted to Fed Chair Jerome Powell’s post-meeting commentary. Powell’s remarks introduced ambiguity regarding the future path of interest rates.
Powell stated that a further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it. This comment initially put downward pressure on the precious metal, while simultaneously strengthening the US Dollar (USD) and boosting Treasury yields.
💡 The near-term outlook for gold appears mixed. Traders are scaling back expectations for a December rate cut following Powell’s measured tone. Historically, lower interest rates make non-yielding assets like gold more attractive, so diminishing prospects for further monetary easing could limit gold’s potential for significant upside.
📌 Meanwhile, the conclusion of a one-year trade truce between the United States and China has provided some temporary relief to market sentiment. Despite this, the ongoing US government shutdown and persistent geopolitical and economic uncertainties continue to foster caution among investors.
Market Dynamics: Fed, Trade, and Economic Factors
On Thursday, US President Donald Trump and Chinese President Xi Jinping concluded discussions during the APEC summit in South Korea. The leaders reached an agreement on a one-year trade truce. This deal includes a reduction in US tariffs on Chinese goods, lowering them from approximately 57% to 47%, and a commitment from China to resume purchasing US soybeans. President Trump reported that China has agreed to continue the flow of rare earth, critical minerals, magnets, etc., openly and freely.
The US central bank reduced the federal funds rate by 25 basis points, setting the target range between 3.75% and 4.00%. This decision was not unanimous, with Fed Governor Stephen Miran advocating for a more substantial 50 bps cut and Kansas City Fed President Jeffrey Schmid favoring no change in rates.
📊 In its Monetary Policy Statement, the Fed indicated that economic activity continues to expand at a moderate pace, although job growth has slowed and inflation remains somewhat elevated. Policymakers acknowledged that uncertainty surrounding the economic outlook is still considerable, and downside risks to employment have increased in preceding months. The Committee also announced its intention to conclude Quantitative Tightening (QT) by halting the reduction of its securities holdings on December 1, signaling a pause in the runoff of its balance sheet.
⚡ In his press conference, Fed Chair Jerome Powell addressed the inherent tension between combating inflation and supporting employment, noting that these objectives cannot be fully achieved with a single policy instrument. He added that the policy rate is now situated within the range of many estimates for a neutral rate, and that developments in labor market data, whether stabilizing or strengthening, would influence future policy decisions. Powell also highlighted a growing chorus within the Committee suggesting that it might be prudent to wait before initiating further policy adjustments.
📈 According to the World Gold Council’s Q3 2025 Gold Demand Trends report, released on October 30, total gold demand experienced a 3% year-over-year increase, reaching 1,313 tonnes and marking a record quarterly high. Investment demand surged by 47% to 537 tonnes, fueled by substantial ETF inflows totaling 222 tonnes and continued bar and coin purchases amounting to 316 tonnes. Central bank buying remained robust at 220 tonnes, up 28% from the prior quarter. Conversely, jewelry consumption saw a 19% decline amidst record-high gold prices.
Technical Outlook for XAU/USD
XAU/USD is currently trading with vulnerability below the $4,000 level, attempting to find stability after recent price swings. However, there appears to be a lack of strong follow-through buying momentum.
⚡ On the four-hour chart, immediate resistance is observed around the 21-period Simple Moving Average (SMA), located near $3,982. This is followed by the significant price zone between $4,000 and $4,020.
📍 A definitive breach above this overhead area could potentially shift the near-term outlook to a more bullish stance. Nevertheless, the precious metal may encounter renewed selling pressure in the region between $4,100 and $4,200.
📍 On the downside, $3,900 is acting as a crucial support level, where buying interest has repeatedly materialized in recent trading sessions. A failure to hold this level could indicate a continuation of the broader corrective trend.
📊 The Relative Strength Index (RSI) is positioned close to 44, suggesting modestly bullish momentum but with limited immediate upside potential.
Gold FAQs
Gold has historically served as a store of value and a medium of exchange. Beyond its aesthetic appeal for jewelry, gold is widely regarded as a safe-haven asset, making it an attractive investment during periods of market turmoil. It is also considered a hedge against inflation and currency depreciation, as its value is not tied to any specific issuer or government.
Central banks are the largest holders of gold. They often diversify their reserves and acquire gold to bolster the perceived strength of their economies and currencies, especially during uncertain times. High gold reserves can enhance a country’s solvency perception. According to the World Gold Council, central banks collectively added 1,136 tonnes of gold, valued at approximately $70 billion, to their reserves in 2022, marking the highest annual purchases on record. Emerging economies, including China, India, and Turkey, are notably increasing their gold reserves.
Gold typically exhibits an inverse correlation with the US Dollar and US Treasuries, both of which are significant reserve and safe-haven assets. When the US Dollar depreciates, gold prices tend to rise, offering investors and central banks a means to diversify holdings during volatile periods. Gold also tends to move inversely to risk assets; a rally in the stock market often weakens gold prices, while sell-offs in riskier markets can favor the precious metal.
Gold prices are influenced by a wide array of factors. Geopolitical instability or fears of a significant recession can lead to rapid increases in gold prices due to its safe-haven status. As an asset that does not yield interest, gold tends to perform better in environments of lower interest rates, while higher borrowing costs typically put downward pressure on its price. However, a significant driver of gold price movements is the behavior of the US Dollar (USD), given that gold is priced in dollars (XAU/USD). A strong dollar tends to cap gold prices, whereas a weaker dollar is likely to push gold prices higher.
Final Thoughts
The gold market is currently navigating a complex environment shaped by the Federal Reserve’s recent rate cut and cautious forward guidance, alongside developments in US-China trade relations. While a trade truce offers some market stabilization, broader economic and geopolitical uncertainties persist, supporting gold’s traditional safe-haven appeal.
Traders will remain attuned to Fed communications and economic data for further clues on the future path of interest rates, which will likely continue to influence XAU/USD price action. Technical levels around $4,000 and $3,900 are key reference points for short-term market direction.