Gold reclaims its footing as Oil retreat blunts Fed shock

Gold (XAU/USD) price extends its gains on Friday, edging up 0.89% as Oil prices eased despite renewed concerns of supply shortages and despite a week that featured a rate hike by the Federal Reserve (Fed), which pushed the yellow metal to a nearly two-month low of $4,235. XAU/USD trades at $4,379 at the time of writing.

XAU/USD rebounds as softer crude offsets lingering pressure from near-5% yield

The yellow metal remains bid as risk appetite soured amid growing concerns that the Middle East conflict, which involves the US and Iran exchanging attacks in the Persian Gulf, while the Houthis and Saudi Arabia fight in the Red Sea.

Last week, the Houthis, an Iran-backed Yemeni group, attacked the Arabian East-West Oil pipeline, forcing its shutdown. This would delay Oil shipments to buyers in Europe, according to a Bloomberg article, which noted that Saudi Aramco has not confirmed the information.

Despite this, West Texas Intermediate (WTI) continues to trade subdued, capping the Greenback’s advance. The US Dollar Index (DXY), which measures the performance of the buck against six peers, is almost flat at 100.29.

The US 10-year Treasury yield is up nearly six basis points to 4.996%, boosted mostly by the Federal Reserve's 0.25% rate hike on Wednesday, following a unanimous decision.

Worth noting, the dot plot in the Fed’s projection materials showed that most officials expect at least one more rate hike. Fed Chair Kevin Warsh recognized that the economy remains strong, which justified the first rate increase in three years, with the Fed emphasizing the need to achieve the 2% inflation goal.

US data showed that Industrial Production remained flat from July to August at 0% MoM, falling short of July’s 0.2% and the expected 0.3% growth.

Money markets priced in a 55% chance that the Fed would increase rates again at the October meeting, according to Prime Terminal.

Recently, Kansas City Fed President Jeffrey Schmid said he supported the rate hike, noting that inflation continues to trend above 3% and that, excluding inflation, the economy is performing well.

The central bank bonanza ended with the Bank of England holding rates unchanged, while the Bank of Japan opted for a 25-basis-point rate increase to 1.25%.

Next week, the US economic docket will feature speeches by Federal Reserve officials, jobs data, S&P Flash PMIs data and Durable Goods Orders.

XAU/USD technical analysis: Gold struggles at $4,400; retreats despite remaining positive

Price action shows Gold facing stiff resistance at $4,400, with the yellow metal retreating after reaching a high of the day of $4,399. The Relative Strength Index (RSI) shows momentum favouring buyers, with the index turning bullish.

If XAU/USD clears $4,400, this opens the path to challenge key resistance levels like the $4,450 and $4,500 psychological milestones.

On the flip side, for a bearish resumption, Gold must drop below the 100-day Simple Moving Average (SMA) at $4,320, then the 50-day SMA at $4,288, and finally the September 16 low at $4,235.