• Gold remains depressed near a one-week low, touched earlier this Thursday.
• Fed rate hike bets and elevated US bond yields continue to underpin the USD.
• Geopolitical risks further benefit the buck and cap the upside for the bullion.

Gold (XAU/USD) is consolidating near a one-week low, touched during the Asian session on Thursday, as traders wait on the sidelines ahead of a crucial meeting between US President Donald Trump and his Chinese counterpart Xi Jinping. Expectations for a major announcement are low, though market players will look for any progress on rare earths, technology restrictions, and an extension of the current US-China truce. Nevertheless, the incoming headlines could infuse volatility and provide some impetus to the precious metal.

Any intraday move up, however, is likely to remain capped amid rising US Federal Reserve (Fed) rate hike bets, which tend to undermine the non-yielding Gold. According to CME Group’s FedWatch Tool, traders are now pricing in a nearly 70% chance that the US central bank will raise borrowing costs again in October. The expectations were lifted by a private survey, which showed that US business activity accelerated for a fourth straight month in September. In fact, the S&P Global flash Composite PMI Output Index rose from 56.0 in August to 58.4, the highest level since July 2021.

Meanwhile, tensions between the US and Iran took center stage at the United Nations General Assembly (UNGA) after Trump stated that Iran faces a choice of diplomacy or total destruction. In response, Iran’s President Masoud Pezeshkian said that Iran will never bend the knee, but is ready for a diplomatic solution. Pezeshkian also insisted that any deal would have to include an end to the US blockade, targeting Iranian ports and maritime shipping in and around the Strait of Hormuz. This led to a 3% rally in crude oil prices, reigniting inflation fears and underpinning prospects for further Fed tightening.

The growing acceptance that the US central bank will stick to its hawkish stance pushed the yield on the benchmark 10-year US Treasury bond to its highest level since July 2007 and lifted the US Dollar (USD) to a nearly two-month high on Wednesday. This, in turn, backs the case for a further near-term depreciating move for gold, though the subdued price action warrants some caution for aggressive bearish traders. Hence, weakness below the monthly swing low, around the $4,235 area, touched last Wednesday, is needed to reaffirm the negative outlook and pave the way for deeper losses.

XAU/USD daily chart

Technical Analysis

The XAU/USD pair maintains a capped tone below the 100-day Exponential Moving Average (EMA) and the 50% retracement level. Meanwhile, a negative Moving Average Convergence Divergence (MACD) reading and a mid-range Relative Strength Index (RSI) around 44.6 hint that bullish momentum has faded. Hence, any attempted recovery move is likely to be sold into while the Gold price remains under the clustered resistance.

On the downside, the 61.8% Fibonacci retracement at $4,227 offers nearby structural support, ahead of the 78.6% level at $4,101 and the prior swing floor at $3,940. On the topside, immediate resistance aligns at the 50% retracement at $4,316, followed by the 100-day EMA at $4,359 and the 38.2% retracement at $4,405. A sustained break above this cluster would be needed to ease the bearish bias and open the way toward $4,515 and $4,693.