Gold faces pressure with potential downside limits; the dual impact of a strong dollar and rising risk appetite

Gold prices were weak at the start of this week, with the US dollar maintaining high levels not seen since late May, exerting clear pressure on precious metals. Optimistic market risk appetite has reduced demand for safe-haven assets, but ongoing geopolitical tensions may set a defensive line for further declines.

Diverging Fed Officials’ Attitudes Benefit the Dollar While Limiting Gold

Mixed signals from within the Federal Reserve have become a key factor influencing gold prices. New York Fed President John Williams stated that current policy is moderately restrictive and believes there is room for rate cuts in the short term, directly boosting market expectations for a December rate cut to about 67%. However, Dallas Fed President Lori Logan advocates for holding rates steady for now, signaling a hawkish stance.

This policy uncertainty has allowed the dollar to remain strong. The dollar’s strength at the beginning of the week put downward pressure on gold, while optimistic expectations for rate cuts have also increased appetite for risk assets like stocks, further weakening demand for safe-haven precious metals like gold.

Geopolitical Risks Continue to Fester, Temporarily Hindering a Sharp Rally

The conflict between Ukraine and Russia shows no signs of easing. Ukraine launched drone attacks on Russian Moscow-region power plants, while Russia claims to have occupied three villages in eastern Ukraine. US President Donald Trump has set a deadline of November 27 for Ukraine, demanding approval of a 28-point peace plan. Ukraine is currently seeking to amend the proposal to reduce concessions to Russia’s hardline demands.

These unresolved geopolitical risks provide potential support for gold, possibly forming a protective barrier before further declines. Traders should remain cautious before establishing short positions, avoiding neglect of sudden events’ impacts.

Heavy Economic Calendar This Week, Fed’s Future Path in Focus

The US economic schedule is relatively busy this week. On Tuesday, delayed Producer Price Index (PPI), Retail Sales, and Conference Board Consumer Confidence Index will be released. On Wednesday, preliminary Q3 GDP data and Personal Consumption Expenditures (PCE) Price Index will be announced.

PCE data is particularly critical, as it will provide important guidance for the Fed’s future rate cut path, influencing the dollar’s direction and gold performance. The market is currently trading within familiar ranges, awaiting these economic data to provide new momentum.

Technical Outlook: $4030 as Key Support, Break Below May Signal Bottom

From a technical perspective, gold/USD has held above the upward trendline support extending from late October. This support level is around $4030, coinciding with the 200-period exponential moving average (EMA) on the 4-hour chart, forming a crucial turning point.

A decisive break below $4030 could see gold further decline toward the psychological $4000 level, then test last week’s low of approximately $3968-3967. The downward trajectory could extend to the $3931 support, ultimately reaching the $3900 level and the late October low of about $3886.

Conversely, if gold remains above the $4080 supply zone and breaks through the $4100 level, the next resistance is near $4152-4155. If momentum continues, gold/USD could further climb, reclaiming the $4200 round number. The market is currently at a critical juncture; whether the $4030 support holds or breaks will determine the subsequent direction.