Gold holds below $4,000 as US Dollar strength curbs momentum

LONDON (November 4) Gold (XAU/USD) holds its ground within familiar ranges on Tuesday, recovering modestly from earlier declines after finding support near the $3,970 zone. At the time of writing, XAU/USD is trading around $3,995, as traders remain reluctant to take fresh positions amid a stronger US Dollar (USD) and a cautious tone from the Federal Reserve (Fed).

Gold appears to be in a healthy consolidation phase following its correction from the record high of $4,381 reached on October 20. A pullback in global equities is helping to limit losses in Bullion, as the softening risk appetite offers some support to the metal. However, the upside remains limited amid reduced safe-haven flows and fading expectations of another Fed interest rate cut this year.

Nevertheless, the broader uptrend remains intact as persistent geopolitical and economic uncertainties continue to keep investors cautious. At the same time, the prolonged United States (US) government shutdown remains a drag on market sentiment.

Market movers: Traders reassess December rate cut odds after Fed remarks

• China’s new Gold VAT rules prompted several state banks to halt physical gold redemptions and new retail account openings, as authorities moved to cool speculative demand in the domestic bullion market. The revised policy, which cuts the VAT exemption on certain gold transactions from 13% to 6%, is expected to temporarily curb retail buying and is likely to weigh on short-term demand from one of the biggest global buyers of physical Gold.
• Fed officials offered mixed signals on Monday, with some emphasizing inflation risks while others highlighted a gradual cooling in the labor market. Fed Governor Lisa Cook said inflation remains above the 2% target and could stay elevated through next year due to tariff effects. However, she stressed the need for policy to remain “appropriately focused” to restore price stability. She added that the recent 25-basis-point rate cut was suitable given rising downside risks to employment, but reiterated readiness to act forcefully if inflation proves more persistent.
• Chicago Fed President Austan Goolsbee said he remains uneasy with front-loading rate cuts and views inflation as still “worrisome,” while Fed Governor Stephen Miran warned it is “a mistake to make conclusions about monetary policy from financial conditions alone.” Goolsbee noted the threshold for further easing is now higher than at the past two meetings, and Miran said the Fed could “get to neutral in a series of 50-basis-point cuts but does not need 75-basis-point cuts,” adding that policy has “passively tightened despite Fed cuts.”
• Based on the latest Fed remarks, traders reassessed the outlook for a December rate cut as policymakers offered mixed signals. According to the CME FedWatch Tool, markets now assign roughly a 70% probability of a 25 bps cut at the next meeting, down from 94% a week ago but slightly higher than 65% on Monday.
• UBS said the recent pullback in Gold is likely temporary and maintained its forecast of $4,200 per ounce, with an upside scenario toward $4,700 if geopolitical or market risks intensify. The bank noted that “the much-anticipated correction has taken a breather,” adding that while fading price momentum triggered a second leg down in futures open interest, “underlying demand remains strong” and there is “no fundamental reason for the sell-off.”

FXStreet