Gold (XAU/USD) is attempting to hold its ground. However, the current fundamental picture remains mixed, so market participants should exercise caution when opening long positions in anticipation of further price gains. US dollar bulls remain relatively restrained amid expectations of a diplomatic resolution to the US-Iran confrontation, which provides some support for demand for the precious metal. At the same time, US inflation data released on Tuesday, indicating accelerating price pressures, strengthened expectations of a more hawkish Federal Reserve monetary policy. This has allowed the dollar to approach its October high, thereby limiting gold's recovery.

On Tuesday, following a meeting of G7 foreign ministers in Paris, US Secretary of State Marco Rubio noted that economic pressure on Iran had reached a level at which a large-scale military operation was not currently necessary.

US President Donald Trump also sought to ease concerns about a possible escalation of the conflict following the midterm elections.

He told reporters that the likelihood of renewed US strikes against Iran appeared extremely low, adding that some progress had been made in negotiations aimed at resolving the situation in the Middle East.

In turn, Iran called on Washington to meet its demands under an initiative to restore shipping through the Strait of Hormuz. These signals have created optimistic expectations of a potential diplomatic breakthrough that could bring the US-Iran confrontation to an end. Such a scenario limits dollar strength, as the US currency is traditionally viewed by investors as a safe-haven asset.

However, growing market confidence that the Fed will raise interest rates in December, reinforced by Tuesday's US Consumer Price Index (CPI) report, continues to support the US currency. According to the US Bureau of Labor Statistics (BLS), headline CPI increased by 0.4% in October, exceeding the consensus forecast of 0.3%. Core CPI, which excludes the volatile energy and food components, also rose by 0.3%, matching September's increase and exceeding analysts' expectations of 0.2%.

Fed Governor Christopher Waller warned that higher-than-expected core inflation of 0.3% could justify a more substantial rate hike of up to 50 basis points at the December 8–9 meeting. In his view, limiting monetary policy tightening to just 25 basis points could undermine confidence in the central bank.

Federal Reserve Bank of Philadelphia President Anna Paulson, in turn, emphasized that restrictive monetary policy must remain in place to bring inflation back to the 2% target. Federal Reserve Bank of Dallas President Lorie Logan suggested that the pace of interest rate increases could be faster than previously anticipated.

These statements strengthen the position of US dollar bulls and could limit further gains in gold prices.

Christopher Waller has adopted notably more hawkish rhetoric. His FXS Speechtracker score reached 9/10, significantly above the historical average of 7.3/10, reflecting a pronounced inclination toward further monetary policy tightening. Waller acknowledged the possibility of a 0.50-percentage-point rate hike in December if October core CPI rises by approximately 0.3% or more. He also stated that a rate increase of at least 0.25 percentage points would be necessary even if inflation data proved more favorable. This indicates the Fed's readiness to respond decisively to any signs that US inflation is deviating from its target.

The emphasis on the broad-based nature of price pressures, expectations of further increases in producer prices and energy costs, and the view that current monetary policy is not sufficiently restrictive increase the risk of higher US Treasury yields and short-term interest rates. The FXS Fed Sentiment Index rose by 3.17 points to 145.50. This confirms a decisive shift toward a more hawkish stance and is consistent with the elevated FXS Speechtracker reading. Since the index is significantly above the neutral level of 100, markets are likely to price in a higher probability of further Fed monetary policy tightening, supporting the US dollar against lower-yielding assets.

From a technical perspective, during today's recovery attempts, XAU/USD failed to hold above the 20-day Simple Moving Average (SMA). However, the pair remained above $4,035, which is currently acting as support. Below this level, the pair could find support at yesterday's low, followed by the round-number level of $4,000. The nearest resistance is now at $4,055, where the 20-day SMA is located. Above this level, resistance is likely around $4,080. However, as the oscillators remain in negative territory, bears currently have the advantage.

The table below shows the percentage change in the US dollar against major global currencies over the current week. The dollar recorded its most significant gain against the Canadian dollar.