Gold Rebounds Strongly

 

Gold prices staged a strong recovery from weekly lows, climbing back above the $4,150 level during early trading on Thursday. The US Dollar (USD) and US Treasury yields retreated further from their post-CPI highs following reports of Chinese bond purchases. However, the bearish daily Relative Strength Index (RSI) continues to pose a challenge for bullish momentum.

XAU/USD Technical Analysis

XAU/USD has traded within a $4,100–$4,200 range since the beginning of October, while remaining below the 50-day, 100-day, and 200-day Simple Moving Averages (SMAs) on the daily chart.

Momentum indicators point to continued consolidation. The Relative Strength Index (RSI) is hovering around 42, remaining below the neutral 50 level and suggesting that bearish momentum still dominates. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator has turned slightly positive, signaling that the market has yet to establish a clear directional trend.

On the upside, initial resistance stands at the psychological $4,200 level, followed by the 100-day SMA at $4,249 and the 50-day SMA at $4,337. A sustained recovery could encounter further resistance near $4,400 before bringing the 200-day SMA at $4,525 into focus.

On the downside, initial support is located at $4,100. A sustained break below this level could expose the $4,000–$3,950 support zone, potentially extending the broader bearish trend.

Strong US Inflation Pressures Gold

Gold (XAU/USD) extended its intraday losses on Wednesday after stronger-than-expected US inflation data boosted the US Dollar and Treasury yields. At the time of reporting, XAU/USD was trading near $4,095, down 1.57% on the day.

The US Consumer Price Index (CPI) rose by 0.6% month-over-month in September, matching expectations and accelerating from August's 0.4% increase. Annual headline inflation climbed to 3.7% from 3.4%, exceeding the market forecast of 3.6%.

Core CPI, which excludes food and energy prices, increased by 0.3% month-over-month, above expectations of 0.2% and matching the previous month's pace. Annual core inflation accelerated to 2.6% from 2.4%, also surpassing the forecast of 2.5%.

Following the release, the US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, rose to approximately 102.67, its highest level since April 2025. US Treasury yields also rebounded sharply, with the benchmark 10-year yield climbing around 10 basis points to 5.28%.

A stronger US Dollar makes dollar-denominated Gold more expensive for international buyers, while rising Treasury yields increase the opportunity cost of holding the non-yielding precious metal. Both factors typically weigh on Gold prices.

Geopolitical Risks Keep Inflation Elevated

Higher energy prices linked to escalating Middle East tensions remain a key source of inflationary pressure. Persistent threats to oil supplies could keep fuel costs elevated, making it more difficult for inflation to return to the Federal Reserve's 2% target.

Against this backdrop, the Federal Reserve is expected to maintain a restrictive monetary policy stance. Money markets have increased their expectations for additional interest rate hikes through the end of 2027.

Traders are now pricing in a 51% probability of a rate hike at the October 27–28 meeting, up sharply from 22% before the CPI release. The probability of a December rate hike has climbed to nearly 95%, according to the CME FedWatch Tool.

New York Fed President John Williams said on Tuesday that another interest rate increase in 2026 could be appropriate. However, he does not currently anticipate the need for further hikes in 2027 and expects inflation to move toward the central bank's 2% target next year.

Gold Outlook Remains Cautious

Gold's rebound above $4,150 offers some relief after the recent sell-off, particularly as the US Dollar and Treasury yields retreat from their post-CPI highs. Nevertheless, the broader technical outlook remains cautious as XAU/USD continues to trade below its major daily moving averages.

The $4,200 level remains the first major resistance to watch. A decisive break above this threshold could strengthen the recovery, while failure to hold above $4,100 would increase the risk of a deeper decline toward $4,000–$3,950.

For now, Gold traders will continue monitoring US inflation developments, Federal Reserve rate expectations, Treasury yields, and geopolitical risks for fresh directional signals.

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Gold Prices Slide

Gold prices declined on Wednesday as investors evaluated the Federal Reserve’s monetary policy outlook ahead of the latest US Consumer Price Index (CPI) report. Escalating tensions in the Middle East also raised concerns about energy supply disruptions, potentially driving oil prices higher and sustaining inflationary pressures that could keep interest rates elevated.

At 13:51 WIB, spot gold (XAU/USD) fell 0.3% to $4,148.79 per ounce, while US gold futures edged lower to $4,171.75. Spot silver (XAG/USD) dropped 0.9% to $58.6645 per ounce, and platinum (XPT/USD) declined 0.2% to $1,662.06. In contrast, palladium (XPD/USD) gained 0.6% to $1,133.61, while palladium futures advanced 0.5% to $1,132.50. The US Dollar Index slipped 0.1% to 102.12.

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Higher Oil Prices Pressure Gold

Gold extended its losses for a second consecutive session, declining approximately 0.8% as renewed attacks in the Middle East heightened concerns about potential energy supply disruptions and persistent inflation.

Brent crude oil traded above $106 per barrel, increasing the risk that rising energy costs could complicate the inflation outlook and strengthen the case for tighter monetary policy. If inflation remains elevated, the Federal Reserve could face greater challenges in easing financial conditions, potentially limiting gold’s recovery.

Fed Interest Rate Expectations in Focus

Gold generally faces downward pressure when interest rates and bond yields rise because it does not generate interest income. Higher yields increase the opportunity cost of holding non-yielding assets, potentially reducing demand for gold among investors.

Since the US-Iran war erupted in late February, gold has reportedly fallen by approximately 20% from its earlier levels, as concerns about energy-driven inflation and expectations of tighter monetary policy weighed on prices.

The Federal Reserve raised interest rates last month for the first time since 2023, keeping monetary policy firmly in focus. Investors are now awaiting Wednesday’s US CPI report for September to assess the latest inflation trends and gain further insight into the Fed’s potential policy decisions.

Interest rate swaps indicate that markets see a relatively low probability of another rate hike at the October meeting. However, traders are pricing in approximately a 90% chance of an increase in December, reflecting continued concerns about persistent inflation.

Gold Correction Preserves Long-Term Outlook

Rick Kanda, managing director of The Gold Bullion Company, noted that gold’s strong performance following a record-breaking 2025 helped propel prices to an all-time high of approximately $5,560 per ounce in January.

However, prices subsequently retreated to around $4,185 on October 12, falling below several institutional forecasts for year-end levels.

According to Kanda, the recent correction does not necessarily undermine gold’s long-term bullish outlook. Despite the pullback, prices remain historically elevated, while consolidation following a substantial rally does not automatically indicate a deterioration in the metal’s underlying fundamentals.

Looking ahead, gold traders will closely monitor the US CPI report, Federal Reserve interest rate expectations, US Treasury yields, and geopolitical developments in the Middle East. These factors are likely to influence near-term price movements and determine whether gold can regain its upward momentum.

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Gold Buyers Hesitate

 

Gold prices maintained a mildly positive bias on Tuesday but remained capped below the $4,200 level and the upper boundary of a two-week trading range. The US Dollar (USD) retreated from its highest level since April 2025 amid some profit-taking, providing modest support for the precious metal. However, the Federal Reserve’s (Fed) hawkish policy stance and escalating Middle East tensions could limit deeper losses in the safe-haven Dollar, keeping Gold prices under pressure and warranting caution among aggressive bullish traders.

The XAU/USD pair remained confined within a two-week trading range, extending its bearish consolidation following the decline from the August monthly swing high. Furthermore, Gold continued to trade below the 100-period Simple Moving Average (SMA) on the four-hour chart, reinforcing the negative short-term outlook.

The Moving Average Convergence Divergence (MACD) indicator remained slightly in negative territory, suggesting that bullish momentum was losing strength. Meanwhile, the Relative Strength Index (RSI) hovered near 55, indicating a constructive but gradually cooling bullish tone as Gold consolidated below a key resistance barrier.

Consequently, further upside could encounter initial resistance near the 100-period SMA at $4,204. This is followed by the upper boundary of the trading range around $4,218, while the 61.8% Fibonacci retracement level at $4,241 represents the next significant hurdle.

Beyond these levels, a broader supply zone could emerge between the 50.0% Fibonacci retracement at $4,328 and the 38.2% level at $4,415. Additional resistance lies at the 23.6% retracement level of $4,523, followed by the cycle peak near $4,697.

On the downside, immediate support aligns with the 78.6% Fibonacci retracement level at $4,117. A decisive break below this level could trigger renewed selling pressure, exposing the structural floor around the previous swing low of $3,959.

Hawkish Fed Expectations Support the US Dollar

Minutes from the Federal Open Market Committee (FOMC) meeting held on September 15–16, released last Wednesday, revealed that policymakers considered another quarter-point interest rate increase before the end of 2026 potentially appropriate, as inflation remained above the Fed’s 2% target.

Additionally, hawkish comments from Cleveland Fed President Beth Hammack on Monday reinforced market expectations that the US central bank could raise borrowing costs toward the end of the year. Energy-driven inflation risks have also strengthened the prospect of further monetary tightening, keeping US Treasury yields elevated near multi-year highs.

Hammack’s Hawkish Stance Reinforces Inflation Concerns

Fed official Beth Hammack delivered a notably hawkish message, receiving an FXS Speechtracker score of 8.4 out of 10, well above the historical average of 7.5. The reading highlighted a stronger-than-usual preference for tighter monetary policy.

Her emphasis on maintaining higher interest rates, preserving restrictive financial conditions to bring inflation back to 2%, and preventing inflation expectations from becoming entrenched reinforced the prospect of further tightening.

Hammack also expressed concern that inflationary pressures were becoming more persistent amid broadly neutral financial conditions and demand-driven price pressures, including those associated with artificial intelligence (AI).

Her remarks suggested a preference for relatively prompt and smaller interest rate adjustments, keeping the policy outlook tilted firmly toward further tightening. Such expectations typically provide support for the US Dollar.

Hammack’s focus on explaining the Fed’s policy reaction function, alongside warnings that companies were planning price increases beyond rising costs, reinforced the message that the current inflation trend in the mid-to-upper 2% range remained inconsistent with the central bank’s target.

The FXS Fed Sentiment Index subsequently increased by 0.59 points to 138.92, confirming that Fed communication remained firmly within hawkish territory. The reading stood well above the neutral threshold of 100, indicating that recent central bank commentary was increasingly aligned with expectations for tighter monetary policy.

This policy outlook generally supports the US Dollar against other major currencies and could limit Gold’s recovery, particularly as the precious metal offers no interest income.

Middle East Tensions Limit Gold’s Upside

Meanwhile, Iran-backed Houthi forces in Yemen intensified their campaign against Saudi Arabia, launching additional missiles on Monday. The escalation followed a deadly attack at Riyadh’s King Khalid International Airport over the weekend, prompting Saudi Arabia to threaten retaliation.

US President Donald Trump also raised the possibility of joining military operations against the Houthis and resuming attacks on Iran.

These developments have kept geopolitical risk premiums elevated, supporting demand for the US Dollar as a safe-haven asset. As a result, the geopolitical backdrop could restrict meaningful gains in Gold prices, despite the precious metal’s traditional appeal during periods of uncertainty.

Traders may also prefer to wait for further clarity on the Fed’s monetary policy outlook before establishing fresh directional positions.

Attention is therefore shifting toward the latest US inflation data, with the Consumer Price Index (CPI) scheduled for release on Wednesday and the Producer Price Index (PPI) due on Thursday.

Additionally, Fed Chair Kevin Warsh’s speech at the annual meetings of the International Monetary Fund (IMF) and World Bank in Bangkok on Friday could influence the US Dollar and non-yielding Gold.

Overall, the fundamental backdrop suggests that further Gold advances could attract selling interest, potentially keeping XAU/USD gains limited in the near term.

US CPI Key to Fed Rate Expectations

Analysts at Societe Generale highlighted that the main non-geopolitical event this week would be Wednesday’s US CPI release, describing it as a crucial factor in shaping near-term market expectations for the Federal Reserve.

The analysts noted that an increase in core inflation to 2.5%, in line with market consensus, could leave existing rate expectations largely unchanged.

Under this scenario, a rate increase at the current month’s meeting would remain unlikely, while the probability of a December hike and another increase in the first quarter would remain significant.

Consequently, the upcoming inflation figures could play a decisive role in determining the US Dollar’s next move and whether Gold can break above its current consolidation range or faces renewed selling pressure.

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