Gold gains at start of Fed’s policy week

• Gold rises to near $4,010 ahead of the Fed’s monetary policy announcement on Wednesday.
• The Fed is almost certain to leave interest rates steady in the 3.75%-4.00% range.
• This week, investors will also focus on the US GDP and PCE Inflation data, and Q3 earnings of hyperscalers.

Gold finds bids below $4,000 in the Asian trade on Monday. The precious metal starts the Federal Reserve’s (Fed) monetary policy week on positive note, but is broadly vulnerable, being closer to its three-month low of $3,975.

This week, the key trigger for the Gold price will be the Fed’s monetary policy announcement on Wednesday. According to the CME FedWatch tool, the Fed is almost certain to leave interest rates steady in the 3.75%-4.00% range; this makes the monetary policy guidance a major catalyst for the Gold price.

Latest remarks from several Fed officials have signaled that inflationary pressures are more prolonged in nature and more interest rate hikes are needed to tame them.

Fed’s Hammack delivers a moderately hawkish message, with a 7.2/10 FXS Speechtracker score slightly softer relative to the historical average of 7.6/10 but still signaling concern over persistent price pressures. The emphasis on lower-income Americans struggling with inflation, anecdotal evidence of rising input costs, and explicit worries about an emerging “inflation mentality” point to a bias toward keeping policy tight, especially given the acknowledgement that financial conditions do not appear restrictive and the neutral rate is uncertain. The warning that an entrenched inflationary mindset could force more aggressive action reinforces a risk that the Fed may lean toward further tightening if inflation expectations drift higher.

The FXS Fed Sentiment Index slipped by 0.25 points to 127.92, indicating a marginal pullback in hawkishness versus prior readings. However, with the index still well above the 100 neutral threshold, the Fed tone remains firmly in hawkish territory despite the slight moderation, aligning with Hammack’s focus on inflation risks and potential need for stronger policy responses.

Other than the Fed’s monetary policy, preliminary Q3 Gross Domestic Product (GDP) and Personal Consumption Expenditure (PCE) Price Index, and Q3 earnings reports of Amazon, Alphabet and Microsoft are key notable released this week.

Strategists at OCBC note that gold "came under renewed selling pressure even as US rates moved lower”. They highlight that "Brent’s sharp rise amid renewed Middle East supply concerns added to inflation worries and expectations that the Fed may need to keep rates restrictive for longer," weighing on the precious metal. What they regard as particularly notable is that "gold continued to weaken even as US Treasury yields fell sharply amid the global tech selloff," underlining the metal’s muted response to typically supportive drivers.

According to OCBC, "neither lower yields nor heightened geopolitical uncertainty has been sufficient to support gold, suggesting that near-term sentiment remains fragile." The bank adds that "we remained cautious in the near term, particularly as gold has struggled to respond positively to the recent decline in yields," indicating that a more convincing reaction to easing financial conditions may be needed before confidence in the gold outlook improves.

In the daily chart, XAU/USD trades at $4,011.06, maintaining a bearish near-term bias as it holds beneath the 20-day Exponential Moving Average (EMA) at $4,136.22.

The price action remains capped by this short-term trend proxy, while the Relative Strength Index (RSI) at 35.06 stays near the lower end of its range, hinting at persistent downside pressure without yet signaling extreme oversold conditions.

On the topside, immediate resistance is defined by the 20-day EMA at $4,136.22, which would need to be reclaimed to ease the current bearish tone and open the way for a more sustained recovery. On the downside, the June 30 low at $3,941.76 is the key support level.