Fed’s rate decision to drive XAU/USD’s next move

• Gold price trades marginally lower at around $4,330 at the start of the Fed’s monetary policy week.
• The Fed is highly anticipated to raise interest rates on Wednesday.
• US President Trump seems coming to terms with higher interest rates.

Gold reflects a subdued performance at the start of the Federal Reserve’s (Fed) monetary policy week at around $4,330. Fed’s interest rate expectations heavily influenced last week after the release of the hot United States (US) Producer Price Index (PPI) and Consumer Price Index (CPI) reports for August.

Last week, Fed’s interest rate hike expectations boosted after the release of the hotter-than-expected Producer Price Index (PPI) and Consumer Price Index (CPI) reports for August. The PPI report showed that headline producer inflation accelerated to 5.4% Year-on-Year (YoY) from 4.8% in July.

On the consumer inflation front, YoY readings for both headline and the core inflation remain in line with estimates, but Month-on-Month (MoM) core inflation grew by 0.3% faster than expectations and the prior release of 0.2%.

According to the CME FedWatch tool, the odds of the Fed raising interest rates at the policy meeting on Wednesday have increased to 86.5% from 59.5% seen before the release of the US CPI and PPI data.

Such a scenario boosts yields on interest-bearing assets. At press time, 10-year US Treasury Yields trade close to its fresh highs of 4.99%, a level seen never since November 2023. Higher yields on US bonds diminish the appeal of non-yielding assets, like Gold.

While speaking to reporters at the Irish Open golf tournament over the weekend, US President Donald Trump said, Trump said he did not ​know whether Fed policymakers will raise interest rates ​at their meeting this week. But he said the US "should be paying the lowest interest rate in the world" ​no matter what the Federal Reserve's data indicates about inflation and the economy, Business Standard reported.

This appears to be a dramatic shift in US President Trump’s take on higher interest rates who criticized former Fed Chair Jerome Powell several times for not reducing policy rates in his term and now suddenly seems coming to terms with higher interest rates.

Meanwhile, National Economic Council Director Kevin Hassett told Fox News Sunday that US President Trump "will defend the independence of Kevin Warsh ‌above all" no matter what the Fed does with interest rates.

In the daily chart, XAU/USD trades at $4,330.30, holding below the 20-period exponential moving average (EMA) at $4,393.82, which keeps the near-term bias tilted to the bearish side. The metal has retreated from recent highs and remains capped by this short-term EMA, while the Relative Strength Index (RSI) at 46 leans slightly bearish but not oversold, suggesting sellers retain control without yet reaching exhaustion.

On the topside, immediate resistance is located at the 20-period EMA at $4,393.82, and a sustained break above this barrier would be needed to ease downside pressure and reopen the path toward recent record highs. Looking down, the Gold price could extends the decline towards the July 22 high around $4,166 if it fails to hold the September 2 low at $4,397.86.