XAU/USD corrects after three-day winning streak ahead of key US data

• Gold declines to near $4,040 as the US Dollar regains ground.
• The Fed aims to reduce the number of monetary policy decisions to six from 2028.
• Investors keenly await the US flash Q3 GDP and PCE Inflation data for September.

Gold is down 0.65% to near $4,040 after failing to extend its three-day winning streak on Thursday. The precious metal comes under pressure as the US Dollar (USD) regains ground after a corrective move on Wednesday, following the Federal Reserve’s (Fed) monetary policy announcement.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades almost flat, but is holding its key support level at 102.10.

As expected, the Fed left interest rates unchanged in the 3.75%-4.00% range, and signaled that the Fed is ready to act, citing upside inflationary pressures. “Inflation is very high”, Fed Chairman Kevin Warsh said at the press conference, and added, “We have made clear our readiness to act.”

Two policymakers, Fed Governor Lisa Cook and Cleveland Fed Bank President Beth Hammack dissented in favor of a 25-basis-point rate hike, citing fears of persistently high inflation amid energy supply shocks.

In an unusual proposal, Fed Chair Warsh said the number of interest-rate decisions could be reduced from eight to six per year. In 2028, the Fed plans to host two meetings focused on strategy discussions, with the remaining six centred on policy setting, Warsh said, CNBC reported.

Fewer policy meetings mean less Fed communication at a time when Chairman Warsh is already against so-called “forward guidance”, which would add uncertainty in global markets.

During the day, investors will pay close attention to the preliminary United States (US) Q3 Gross Domestic Product (GDP) and Personal Consumption Expenditure (PCE) Price Index data for September, which will be published at 12:30 GMT.

According to TD Securities, upcoming US activity data are expected to underscore that the economy “will likely show a resilient economy that can handle more restriction.” The bank anticipates that “Q3 GDP [will] show robust underlying growth, PCE prices [will] reflect elevated inflation, and ECI [will] report manageable wage growth,” pointing to a still-firm macro backdrop despite tighter financial conditions. In terms of the headline growth figures, TD Securities notes that “GDP growth picked up in Q3 to 2.5% from 2.2% previously with underlying activity remaining robust,” broadly in line with other projections that emphasize solid consumption and investment even as some components, such as net exports and inventories, act as modest drags.

In the daily chart, XAU/USD trades at $4,040, keeping a bearish near-term tone as spot remains below the 20-day Exponential Moving Average (EMA) at $4,115.80. The metal is capped by this short-term trend indicator, suggesting sellers retain control, while the Relative Strength Index (14) around 39 points to subdued momentum rather than outright oversold conditions.

On the topside, initial resistance is located at the 20-day EMA near $4,115.80, and a daily close above this barrier would be needed to ease immediate downside pressure. Looking down, the June low at $3,941.76 is the key support level.