Gold Holds Near $4,100 as Oil-Driven Inflation Fears Strengthen Hawkish Fed Expectations
Gold prices remained under pressure near the $4,100 psychological level during Thursday's European session as surging crude oil prices fueled inflation concerns and reinforced expectations that the Federal Reserve will maintain a hawkish monetary policy stance.
U.S. crude oil climbed to a fresh six-week high near $90 per barrel following renewed escalation in tensions between the United States and Iran. The rally in energy prices has intensified fears that inflation could remain elevated, strengthening market expectations for additional Federal Reserve interest rate hikes. Higher interest rates typically reduce the appeal of non-yielding assets such as gold by increasing the opportunity cost of holding bullion.
Gold Technical Outlook Remains Constructive
Despite the latest pullback, the XAU/USD pair continues to trade within a one-week uptrend, with immediate resistance clustered between $4,155 and $4,165. This area combines the 200-period Exponential Moving Average (EMA) on the four-hour chart with the 23.6% Fibonacci retracement of the April-to-June decline, making it a critical technical pivot for short-term traders.
Momentum indicators continue to favor the bulls. The Relative Strength Index (RSI) remains around 63, while the Moving Average Convergence Divergence (MACD) stays in positive territory, suggesting buyers remain in control despite increasing selling pressure near overhead resistance.
A decisive breakout above the $4,165 resistance zone could pave the way toward the 38.2% Fibonacci retracement at $4,303.59, reinforcing the bullish outlook. On the downside, key structural support is located at the Fibonacci anchor near $3,940.90, where stronger buying interest could emerge and establish a more sustainable recovery.
Middle East Tensions Continue to Support Oil Prices
Geopolitical risks remain elevated after the United States and Iran exchanged attacks for a twelfth consecutive night. Meanwhile, the Iran-backed Houthi movement in Yemen announced a blockade targeting major shipping routes in the Red Sea, a corridor responsible for transporting approximately 7% of global oil supplies.
The latest disruption adds to reduced shipping activity through the Strait of Hormuz, heightening concerns over global energy supply. As a result, crude oil has extended its strong monthly rally, increasing fears that higher energy costs could reignite inflation and force central banks to maintain tighter monetary policies for longer.
Fed Rate Expectations Remain Firm
According to the CME FedWatch Tool, traders now see more than a 90% probability that the Federal Reserve will raise interest rates before the end of the year. Those expectations have continued to support U.S. Treasury yields, with the benchmark 10-year Treasury yield hovering near a two-month high.
However, continued weakness in the U.S. Dollar has provided some support for gold prices, helping limit downside losses. This mixed backdrop suggests traders may prefer waiting for stronger selling pressure before concluding that gold's recent bullish momentum has faded.
Deutsche Bank Sees More Hawkish Fed Pricing
Analysts at Deutsche Bank noted that financial markets have significantly repriced Federal Reserve expectations. Investors are now anticipating a more aggressive policy path, with approximately 34 basis points of tightening priced in for the December meeting, an increase of 2.3 basis points from the previous session.
The bank added that the repricing has contributed to higher real U.S. yields and broader selling across the Treasury market, factors that traditionally weigh on gold prices.
Key Events to Watch
Investors are now focusing on the release of the U.S. Initial Jobless Claims report, which could influence market sentiment during the North American session. Attention will also turn to the highly anticipated European Central Bank (ECB) policy meeting, which may trigger increased volatility across currency and precious metals markets.
At the same time, any further escalation in the Middle East conflict is expected to remain a major catalyst for gold prices, creating short-term trading opportunities as investors balance safe-haven demand against expectations for tighter global monetary policy.