Gold extends range play below $4,100 as rebounding USD meets receding Fed hike bets

Gold (XAU/USD) maintains its sideways consolidative price movement through the first half of the European session, trading above the $4,050 level after a slight bullish gap on Monday. A partial recovery in the US Dollar (USD) from its lowest level since June 17 is considered significant for limiting the upward potential of the commodity.

However, declining hopes of a US-Iran peace deal and a decrease in expectations for a US Federal Reserve (Fed) rate hike could cap further USD appreciation. This, in turn, might discourage traders from making aggressive bearish bets on the non-yielding yellow metal. President Donald Trump called off planned attacks on Iran over the weekend, stating that Middle East allies reached an agreement on Tehran's nuclear program and the Strait of Hormuz would reopen.

This news led to optimism about a diplomatic resolution to end the five-month-long conflict. Additionally, OPEC+ increasing production in September resulted in a sharp fall in crude oil prices, easing inflation concerns and weighing on bets for a more aggressive Fed tightening policy, helping to keep any meaningful USD appreciation and support the Gold price.

Traders, however, are cautious about placing new bearish bets on the USD and prefer to wait for further developments regarding the Middle East crisis. Thus, attention remains focused on incoming geopolitical news, which could continue to generate volatility in financial markets and drive the demand for USD. Apart from this, traders will monitor crucial US macro data released at the start of a new month for possible impetus.

A busy week begins with the release of the US ISM Manufacturing PMI later on Monday. Market focus stays on the key US monthly employment figures, known as the Nonfarm Payrolls (NFP) report on Friday. From a technical standpoint, the XAU/USD pair remains within a familiar range below the 200-day Simple Moving Average (SMA). This situation appears to be a bearish consolidation phase, suggesting that the path of least resistance for the Gold price is to the downside.

The Moving Average Convergence Divergence (MACD) indicator (12, 26, close, 9) stays positive, indicating tentative upside momentum. However, the Relative Strength Index (14) is neutral, showing only limited directional conviction. Therefore, any further upward move might face difficulty in gaining acceptance above $4,100. The level acts as a barrier, and a decisive break above it could propel Gold to the 200-day SMA near $4,490.33.

Bulls need to reclaim this significant technical barrier to ease the prevailing bearish sentiment and open the path to higher highs. On the downside, immediate support is expected from recent swing lows in the $3,976–$4,000 range, where buyers previously appeared. A clear break below this zone would signal fresh bearish traders and expose the XAU/USD pair to further declines.