Gold drifts lower as Fed rate hike bets and Middle East tensions boost USD

Gold prices dipped recently, slipping below the $4,050 mark during the Asian trading session. The US Dollar (USD) gained strength as the Federal Reserve (Fed) maintained interest rates at the October policy meeting, with most members agreeing to avoid a quarter-point increase. Fed Chair Kevin Warsh highlighted persistent inflation concerns and geopolitical risks, indicating potential tightening measures at the December meeting.

The CME Group's FedWatch Tool suggests an 80% probability of a rate hike that year. This hawkish sentiment boosted USD demand, pushing investors away from non-yielding assets like Gold. Reports of a possible military campaign in the Middle East added to the safe-haven appeal of the USD. Meanwhile, Iran's Foreign Minister stated that the Iranian armed forces are prepared to defend the country while maintaining diplomatic channels.

US Vice President JD Vance reached out to Iranian officials to revive peace talks, but tensions between Iran-backed Houthi rebels and Saudi Arabia-backed forces in Yemen persisted, causing disruptions in oil supply. The latest clashes saw the Houthis targeting Saudi Arabia's largest oil refinery with a ballistic missile, raising fears of further supply disruptions.

These geopolitical developments, coupled with a global economic backdrop of rising energy prices, maintained a negative outlook for Gold prices. Technical analysis indicated a bearish trend below the 100-period Exponential Moving Average (EMA) for the XAU/USD pair, with key resistance levels at $4,105 and $4,125. A breakdown below the $4,000 mark could signal further downside potential.