Spot gold attracted bargain buying on Monday after a sharp selloff last week drove prices down to $3,975, the lowest level since July.
Diplomatic efforts across the Middle East and easing regional tensions pushed oil prices lower, offering some support to gold.
However, a rebounding US dollar capped gold's upside ahead of Wednesday's Federal Reserve monetary policy decision, with spot gold trading near $4,025 intraday, up 0.79% for the day.
The US Dollar Index (DXY) stood at 101.875, after falling to 101.45 last week, its lowest since October 1.
According to reports, officials from the three member states of the Mecca agreement — Saudi Arabia, Pakistan and Turkey — held talks with Iranian leaders in Tehran on Monday.
Iranian Foreign Ministry spokesman Esmail Baghaei said the talks would address Israel's expansionist policies, the situations in Palestine and Lebanon, and the various consequences of US-Israeli military action against Iran.
Before this meeting, Qatari mediators held talks with Iranian officials in Tehran on Sunday aimed at easing regional tensions.
West Texas Intermediate (WTI) crude retreated from a May high of $103.28 touched on Friday to around $100.30 per barrel.
Gold fell about 4% cumulatively last week.
Rising oil prices reinforced expectations that the Fed will tighten monetary policy further, an adverse factor that outweighed the benefits of falling US Treasury yields and a weaker dollar.
Concerns over investment risks in the artificial intelligence sector drove capital into government bonds, weighing on Treasury yields.
Broad equity selloffs also forced some traders to dump gold to cover losses in other markets.
The Fed's monetary policy decision will determine whether gold can hold the $4,000 psychological threshold or face another round of selling.
The market widely expects the Fed to keep the 3.75%-4.00% rate range unchanged, after a 25 basis point hike in September.
But if policymakers leave the door open to another hike in December, even a pause this time would hardly be bullish for gold longs; according to the CME FedWatch tool, traders are currently pricing about a 79% probability of a December hike.
Fed Expected to Hold Rates, but Sticky Inflation Raises December Hike Risk
Analysts at TD Securities believe: "The Federal Open Market Committee (FOMC) and Chair Warsh will likely not deliver much new signal."
The firm said: "A pause in October would further raise the odds of a December hike," especially after September's Consumer Price Index (CPI) came in above expectations, fully demonstrating that "inflation risks remain impossible to ignore."
TD Securities expects the Fed to hike two more times, in December and March of next year, noting that "inflation is still above target and various risks continue to accumulate."
The institution added that the performance of subsequent inflation data will determine the magnitude and pace of further hikes in this cycle — in other words, price-related data will be the core determinant of Fed policy direction from early next year onward.
(Spot Gold Daily Chart Source: Yihuitong)
On the daily chart, gold prices have rebounded from lows near the previous trough, with prices now running near the lower Bollinger Band and attempting to stabilize in a short-term support area.
However, the overall price structure remains below medium- and long-term moving averages, with the Bollinger middle band and the upper moving average cluster pressuring gold, making the rebound more of a "post-selloff repair" rather than a clear trend reversal.
On indicators, the MACD green bars have narrowed somewhat, suggesting short-term momentum is repairing, but no clear golden cross or trend turn has formed yet; RSI has risen from low levels, showing bearish pressure has eased somewhat, but the reading has not yet entered strong territory.
Therefore, the current rebound mainly reflects bargain buying at lows and is not sufficient to prove the downtrend has ended.
Upside resistance: near the Bollinger middle band and the dense moving average area on the chart, roughly in the $4,130–$4,240 range.
If gold cannot break through this area with volume, rebound room will be limited, and the market still risks testing lows again.
Downside support: near recent lows around $3,975–$3,950.
If prices can consistently hold this area, the low-level consolidation and repair pattern may continue; conversely, an effective break below support could open further downside space, targeting $3,900 or even lower.
The current technical picture remains bearish, and the foundation for a rebound is not yet solid.
Gold's next moves should focus on two points: first, whether it can hold the lower Bollinger Band and repair above the middle band; second, whether the moving average pressure zone can be effectively broken.
Before key resistance is broken, the current rebound should not be directly defined as a trend reversal.
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