Gold Price at Risk: XAU/USD Struggles to Break Above $4,100 as Fed Hawkishness Caps Rally

Gold rallies toward $4,105 but faces resistance from Fed policy headwinds. - Upcoming Fedspeak from multiple officials could reinforce dovish-resistant monetary stance. - Delayed economic data release poses mixed signals for precious metal demand.

The yellow metal is attempting to reclaim ground around $4,105 in early Friday trade, recovering from a two-day decline as USD weakness provides temporary support. However, the broader narrative remains challenging, with Federal Reserve policymakers scheduled to deliver remarks that could limit upside potential for gold investors.

Fed’s Hawkish Stance Remains the Key Headwind for Gold

The primary headwind for precious metals stems from persistent hawkish commentary from US Federal Reserve officials. Kansas City Fed President Jeffery Schmid reinforced this tone on Friday, stating that monetary policy should “lean against demand growth” and characterizing current Fed policy as “modestly restrictive”—a position he views as justified given current economic conditions.

This messaging has significantly shifted market expectations around rate cuts. The probability of a 25 basis point rate cut at December’s Fed meeting has contracted to approximately 54%, down sharply from 62.9% probability just one week prior, according to the CME FedWatch Tool. When the Fed maintains restrictive policy and signals reduced rate-cut probability, gold—which generates no yield—loses its appeal relative to fixed-income alternatives.

Further pressure is expected when Fed officials John Williams, Philip Jefferson, Neel Kashkari, and Christopher Waller take the podium for scheduled remarks. Investors will scrutinize these comments for any hints of policy adjustment, though the current consensus leans toward maintained hawkishness.

Economic Data Deluge Could Offer a Second Catalyst

With US government operations restored following President Trump’s signing of the funding bill last week—ending a 43-day shutdown that marked the longest in US history—markets now brace for a flood of delayed economic statistics.

The resumption of data releases carries particular significance because analysts anticipate the reports will reveal underlying labor market softness and economic slowdown. Traditionally, such weakness supports safe-haven asset prices like gold, as investors seek protection amid uncertainty. Additionally, weaker-than-expected economic growth data would likely pressure the US Dollar, and since gold is priced in USD, a weaker greenback typically supports precious metal valuations.

Can Gold Cap Its Losses?

The current dynamic presents a paradox: while economic uncertainty should theoretically support gold, the Federal Reserve’s reluctance to shift toward easier monetary policy constrains the metal’s upside. Near-term, XAU/USD faces a critical test around the $4,100 level, where hawkish Fed rhetoric and reduced rate-cut expectations could cap any sustained rallies.

Investors watching gold should focus on two competing narratives—whether Fed resolve eventually weakens as economic data disappoints, or whether the central bank maintains its current stance, limiting precious metal appreciation potential.