Gold prices (XAU/USD) are recovering on Tuesday, but buying activity remains limited as investors are reluctant to increase their positions ahead of the outcome of the Federal Open Market Committee (FOMC)'s two-day meeting, which concludes on Wednesday.

Federal Reserve officials have indicated that there is no immediate need for further rate hikes. However, the market assigns a probability of more than 80% to another increase in borrowing costs at the December meeting. Inflation risks associated with high energy prices are further reinforcing these expectations and strengthening the case for additional monetary policy tightening.

As no updated set of economic projections is expected, the FOMC's accompanying statement and Fed Chair Kevin Warsh's comments at the post-meeting press conference will be particularly important.

Attention should also be paid to the preliminary estimate of US GDP for the third quarter and the Personal Consumption Expenditures (PCE) Price Index, both scheduled for release on Thursday. These indicators could provide further clarity on the Fed's policy path, influence the US dollar, and consequently affect the price of the precious metal.

Ahead of the central bank's decision and the release of key economic data, a moderate rise in US Treasury yields following their recent decline to a three-week low, together with geopolitical instability, is supporting the US dollar in its role as a safe-haven asset. The geopolitical risk premium remains elevated amid a pause in US-Iran negotiations and renewed attacks on Saudi Arabia by Iran-backed Houthi forces.

On Monday, the Houthis reported strikes on Saudi pumping stations along the East–West oil pipeline and on Riyadh Airport. In addition, reports indicate that the Lebanese group Hezbollah is preparing for a possible escalation of its conflict with Israel, reducing the likelihood of a swift improvement in the Middle East situation. These factors are strengthening the position of US dollar bulls and limiting gold's upward potential.

In the short term, the technical outlook for XAU/USD remains bearish, particularly following the recent downside breakout from a four-week trading range. The precious metal is trading below all major moving averages. The nearest resistance levels are at $4,065 and the 9-day exponential moving average (EMA). A break above these levels would bring prices back into the four-week range from which they broke out last Thursday. Support is located just below the psychologically important $4,000 level and at the October low. Oscillators remain in negative territory, giving sellers the advantage.

The table below shows the percentage change in the US dollar against major currencies for the current week. The dollar has strengthened most noticeably against the euro.