Gold holds above the major $4,300 support zone even after a hotter-than-expected inflation reading lifted odds of a Fed rate hike this week. Traders now price an 87% chance of an increase on Wednesday, while rising oil tied to Middle East tensions adds further pressure on the metal.
Gold rallied Friday despite a higher-than-expected monthly core inflation reading, an unusual reaction given the data strengthened the case for tighter policy. The metal has nonetheless held the major $4,300 support zone that has defined its recent trading range.
Rate-hike bets build ahead of the FOMC
The inflation print boosted expectations for a Fed rate hike, with traders now pricing in an 87% chance of an increase on Wednesday. At the same time, a hawkish repricing triggered by surging oil prices pushed real yields higher, a dynamic that typically weighs on gold.
Even so, the metal has stayed resilient above support. Traders are now waiting on Wednesday's FOMC decision, where the Fed is expected to hike rates by 25 basis points — the first increase since 2023.
Middle East developments add another layer of risk
The other major focus is the Middle East, where oil prices continue to rise and fuel inflation concerns amid worsening disruptions and supply fears. Oil has been the key driver of markets recently, so any de-escalation there could push oil prices lower and unwind some of the aggressive rate-hike pricing, which would support gold.
Traders will also watch for hawkish surprises at the Fed meeting, since those could send gold lower by tightening financial conditions further.
Technical picture leans bearish near term
On the daily chart, gold is trading again at the $4,311 support, where buyers could step in with defined risk to target a rally toward $4,890. Sellers, on the other hand, need a break lower to open the door toward $3,885.
Meanwhile, the four-hour chart still shows a downward trendline defining the bearish structure, with sellers likely to lean on any pullback into that line to press toward new lows. The near-term fundamentals point to further downside for gold, unless the Middle East de-escalates or the Fed turns dovish.
Source: Investinglive
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