Gold recovers to nearly $3,900 despite inflation concerns

• At around $3,895, gold regains ground in early Asian trading on Monday.
• Inflation concerns intensify as oil climbs, bolstering expectations of a Fed rate rise.
• A December interest rate increase by the Fed remains the market’s expectation.

Near $3,895 in Monday’s early Asian session, gold (XAU/USD) is recovering part of its recent losses. The modest advance follows a fall to a low of $3,870 in the preceding session. Scope for further gains nevertheless appears constrained: high oil prices and worries about inflation have strengthened expectations that US interest rates will rise.

Traders are preparing for another week of potential volatility following the latest sell-off. Continuing Middle East tensions, US employment figures and the midterm elections are expected to bring further uncertainty to financial markets.

According to The Guardian, Ukraine has restarted strikes on Russian oil refineries after a pause of about two weeks, defying pressure from US President Donald Trump ahead of the US midterm elections. Separately, Iran’s Supreme Leader instructed his senior military commanders to prepare for a fresh confrontation with the US and Israel.

A roughly 72.9% probability of a US rate increase in December is now priced into markets, according to the CME FedWatch tool. While the Federal Reserve (Fed) left rates unchanged at its October policy meeting, it remains committed to reducing inflation. Rising interest rates make holding non-yielding gold more costly in terms of forgone returns.

Simon-Peter Massabni, Head of Business Development at XS.com, said: “The decisive factor will be whether incoming economic data prompt markets to reassess the interest-rate outlook, shifting expectations toward a pause in tightening or a resumption of rate cuts. Until then, gold is likely to remain under selling pressure, despite supportive factors that continue to underpin its medium- to long-term outlook,”

Gold fails to gain from lower yields as Fed rate rise risk persists

Gold’s rebound has lost momentum, according to OCBC strategists, who describe prices as “slipping back towards lows of 4000 despite some easing in US Treasury yields and oil prices.” In their assessment, September “core PCE came in largely as expected at 3.1% YoY, while stronger 3Q26 GDP reinforced the resilience of the US economy,” meaning the figures “offered little reason for markets to meaningfully pare expectations of another Fed hike in December, following this week’s policy hold.”

Of greater significance to OCBC is that “gold’s inability to benefit from lower yields suggests that fresh buying interest remains limited, even as earlier liquidation pressures may be easing.” Sentiment has also suffered, the strategists observe, as “renewed weakness in technology equities also weighed on sentiment as it raises concerns over another bout of broader deleveraging.”

OCBC’s near-term assessment remains guarded: “we remain cautious near term, with further consolidation or another test of recent lows not ruled out,” the strategists say. They also highlight that “Friday’s Employment Cost Index and the direction of equities, yields and USD will be important to watch.”

Logan strengthens hawkish Fed outlook with call for at least two further rate rises

An FXS Speechtracker reading of 8/10, slightly higher than the historical average of 7.7/10, captures the distinctly hawkish tone of Fed official Logan’s remarks and signals greater conviction that policy needs to tighten. Logan’s assertion that the Fed “needs at least two more quarter-point rate hikes”, alongside the view that skipping a meeting leaves the ultimate policy destination unchanged, reflects a firm commitment to making policy “modestly restrictive”. Inflation, in particular, is still considered “unacceptable” against the 2% target. By stressing gradual changes and a clear destination for rates, Logan aims to contain downside risks and give households, businesses and investors time to adjust to higher dollar interest rates, against a backdrop of robust growth and a balanced labour market that could tighten.

Up 0.95 points at 143.62, the FXS Fed Sentiment Index remains firmly hawkish, in line with Logan’s support for further tightening even if a pause comes in the near term. Standing well above the neutral 100 level, the index confirms that the remarks exert additional hawkish pressure on expectations for the dollar, consistent with the firmer tone registered by the FXS Speechtracker.

Technical Analysis: Gold remains under bearish pressure below the 100-day SMA

On the daily chart, trading below all the major bands cited and the 100-day simple moving average (SMA), XAU/USD continues to decline, leaving the metal firmly under bearish pressure. Its position beneath both the middle and lower Bollinger Bands points to a strong downward breakout. Meanwhile, the Relative Strength Index (14) stands at 32, only just above oversold territory, suggesting that selling momentum is stretched without yet showing a reversal.

Any advance first faces resistance at the lower Bollinger Band, around $3,910. The middle band near $4,085 then presents the first substantial obstacle to a recovery. Further up, a cluster of resistance comprises the 100-day SMA at $4,210 and the upper Bollinger Band at $4,265. Regaining those levels would be necessary to temper the prevailing bearish bias and create scope for a more sustained rebound.

(The technical analysis of this story was written with the help of an AI tool. Know more.)