Spot gold has attracted fresh buying interest for a second consecutive session, though prices remain capped below this week's peak during Friday's Asian trading hours, as market signals paint a mixed picture. A pullback in international crude oil prices has driven U.S. Treasury yields down from multi-year highs, easing short-term concerns over runaway inflation. This softening of bullish momentum in the U.S. dollar has provided underlying support for the non-yielding precious metal.

However, the Federal Reserve's hawkish policy stance continues to underpin the greenback, discouraging investors from building aggressive long positions in bullion. Combined with persistent geopolitical tensions in the Middle East unsettling the market, gold finds itself caught in a two-way squeeze. Looking ahead, U.S. industrial production data, speeches from Fed officials, and developments in the Middle East will all play a role in determining the metal's short-term trajectory heading into the weekend.

Fed's Hawkish Rate Hike and Macro Forces Pull Gold in Multiple Directions

Following the conclusion of this month's Federal Open Market Committee meeting, voting members unanimously approved the first interest rate hike since 2023. The dot plot indicates that Fed officials broadly anticipate one additional rate increase before year-end. At the post-meeting press conference, Fed Chair Kevin Warsh stressed that price stability is a critical prerequisite for U.S. economic growth, emphasizing the pressing need to address persistently elevated inflation.

Ongoing tensions in the Middle East are keeping oil prices elevated, fueling concerns that higher energy costs could stoke inflation and further strengthen expectations for continued monetary tightening from the Fed. Analysts at United Overseas Bank note that the Fed's resumption of its hiking cycle is reshaping the outlook for the U.S. dollar. The bank now expects two more rate increases, suggesting that the narrowing of interest rate differentials between the U.S. and Europe, which had weighed on the dollar index since late 2024, could reverse course and become a tailwind for the greenback.

Against this backdrop, UOB believes its previously cautious dollar outlook is being challenged, with upside risks emerging for the U.S. currency against both G10 and Asian currencies. Data from CME Group's FedWatch tool shows traders currently pricing in a 54% probability of another rate hike in October and roughly 88% odds of a move in December. Geopolitical uncertainty is simultaneously boosting the dollar's appeal as a safe-haven asset, further constraining gold's upside potential. In recent developments, Iran's Islamic Revolutionary Guard Corps claimed it struck a Togo-flagged tanker attempting to illegally cross the Strait of Hormuz, while former President Trump indicated he is considering resuming large-scale strikes on Iran, reinforcing bullish sentiment for the U.S. currency.

Short-Term Strategy: Await Sustained Buying Signals and Watch U.S. Economic Data

Gold has been in recovery mode since touching a six-week low on Wednesday, but investors should be cautious about betting on a sustained rebound prematurely, as stronger and more persistent buying signals have yet to emerge. Friday brings secondary economic releases including U.S. industrial production and capacity utilization figures. During North American trading hours, several key FOMC officials are scheduled to speak, and their remarks could influence dollar movements, introducing fresh volatility for bullion. With the weekend approaching, the latest developments in the Middle East crisis also present short-term trading opportunities for spot gold, as geopolitical risks can quickly alter the pricing dynamics of assets.

Chart: Spot Gold Daily Price Chart

Technical Perspective: Downward Pressure Not Fully Dissipated

From a technical standpoint, despite gold holding above a key Fibonacci support level, the short-term bias remains tilted toward the downside. Prices are hovering above the 50% Fibonacci retracement level at $4,320, a relatively fragile support line following the recent decline. The Relative Strength Index reads 49.52, sitting in neutral territory, while the MACD indicator stands at -19.60, remaining in negative territory, suggesting that downward pressure persists on the chart.

To the upside, the first resistance level is at the 38.2% Fibonacci retracement of $4,408, with stronger resistance at the 23.6% retracement of $4,516 and the previous swing high of $4,692. To the downside, primary support rests at the 50% Fibonacci retracement of $4,320, with deeper support levels at $4,232 and $4,107. Should selling pressure intensify further, a more distant structural support zone lies at $3,947.

Final Thoughts

The gold market currently finds itself at a delicate stage of tug-of-war between bulls and bears. Falling Treasury yields offer support, while the Fed's hawkish stance, a strengthening dollar, and geopolitical risks continue to act as headwinds. On the fundamental front, expectations for further rate hikes this year remain elevated, with institutions like UOB favoring continued dollar strength. Technically, gold's rebound is meeting resistance, and momentum indicators show that bearish forces have not fully subsided. Investors should keep a close watch on U.S. economic data, Fed officials' commentary, and Middle East developments, navigating gold's short-term opportunities cautiously amid this confluence of variables.

Spot Gold Weekly Chart  Source: 易汇通

As of 14:02 Beijing time on September 18, spot gold was quoted at $4,383.06 per ounce.