XAU/USD Bounces Back Above $4,105 as Investors Navigate Hawkish Fed Stance and Economic Data Uncertainty

The precious metal rebounds to $4,105 as traders await critical economic data releases and divergent Fed signals.

Gold price climbs to approximately $4,105 during Friday’s early European session, recovering from a two-day downtrend. The rebound finds support from USD weakness, though momentum faces potential headwinds from recent Federal Reserve commentary that leans decidedly hawkish rather than dovish—a critical distinction for near-term price direction.

The gold market remains caught between two competing narratives. On one hand, the US government shutdown’s conclusion on Thursday has restored some certainty, with federal employees returning to work after the 43-day disruption. This normalization has reduced safe-haven demand, pressuring non-yielding assets like gold. On the other hand, the economic data backlog from the shutdown creates substantial uncertainty about labor market conditions and overall growth momentum, potentially supporting precious metals if weakness emerges.

The Fed’s Hawkish Positioning Clouds the Picture

The central bank’s recent communications suggest officials are taking a firmer stance on inflation control. Kansas City Fed President Jeffery Schmid stated on Friday that monetary policy should “lean against demand growth,” characterizing current policy as “modestly restrictive”—language that underscores the hawkish orientation among policymakers. This hawkish vs dovish split within Fed communication is critical: while dovish members might support rate cuts, the hawkish contingent appears intent on maintaining restrictive conditions longer.

Market pricing reflects this hawkish shift. CME FedWatch data shows financial markets now assign just 54% probability to a 25 basis point rate cut in December, down significantly from 62.9% probability recorded earlier last week. This downward revision demonstrates how quickly sentiment responds to Fed communications that tilt hawkish.

Economic Data Release Schedule Could Reshape Sentiment

The imminent flood of delayed economic reports—from jobs data to consumer spending—will determine whether the Fed can maintain its hawkish posture or whether economic weakness forces a dovish reassessment. Should labor market figures disappoint, the dovish case for December rate cuts would strengthen, providing tailwinds for gold prices.

For now, XAU/USD remains vulnerable to hawkish rhetoric from scheduled Fed speakers including John Williams, Philip Jefferson, Neel Kashkari, and Christopher Waller. The precious metal’s ability to sustain gains above $4,105 depends heavily on whether incoming data surprises to the downside, shifting Fed expectations from hawkish resolve toward dovish accommodation.