Near $3,900: Gold rebounds despite inflation concerns

• $3,895 is gold’s recovery level in early Asian trading on Monday.
• Fed rate hike expectations gain support as rising oil prices stoke inflation concerns.
• A December interest rate increase by the Fed remains the market expectation.

Gold (XAU/USD) has recovered to near $3,895. The metal is recouping some losses in Monday’s early Asian trading, edging up from the previous session’s low of $3,870. Further gains appear constrained, however, as high oil prices and inflation worries strengthen expectations of a US interest rate increase.

Traders are preparing for another potentially volatile week following the latest sell-off. Continuing Middle East tensions, US employment figures and the midterm elections are expected to inject further uncertainty into financial markets.

According to The Guardian, Ukraine has restarted strikes on Russian oil refineries after a pause of about two weeks. The renewed attacks defy 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 another confrontation with the US and Israel.

Reducing inflation remains a priority for the Federal Reserve (Fed), despite its decision to leave interest rates unchanged at the October policy meeting. The CME FedWatch tool now puts the market-implied probability of a December US rate increase at about 72.9%. For gold, which pays no yield, higher rates raise the opportunity cost of holding the metal.

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,”

4000 Lows in Focus as Gold Fails to Benefit From Lower Yields

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.” On the economic backdrop, they note that September “core PCE came in largely as expected at 3.1% YoY, while stronger 3Q26 GDP reinforced the resilience of the US economy,” adding that the figures “offered little reason for markets to meaningfully pare expectations of another Fed hike in December, following this week’s policy hold.”

Of particular 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.” Technology shares are another concern, with the strategists adding that “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.”

At Least Two More Hikes: Logan Reinforces Hawkish Fed Outlook

An FXS Speechtracker score of 8/10 puts Fed official Logan’s message slightly above the historical average of 7.7/10, indicating stronger conviction that policy needs to tighten. Logan’s insistence that the Fed “needs at least two more quarter-point rate hikes”, together with the view that skipping a meeting leaves the policy destination unchanged, signals a firm commitment to making policy “modestly restrictive”. Inflation is still judged “unacceptable” against the 2% target. By stressing gradual adjustments and a clear rate destination, Logan aims to contain downside risks and give households, businesses and investors time to adjust to higher US dollar interest rates. This comes against a backdrop of strong growth and a balanced labour market that could tighten further.

A 0.95-point increase takes the FXS Fed Sentiment Index to 143.62, solidly within hawkish territory. The reading accords with Logan’s support for further tightening, even if a near-term pause remains possible. Standing well above the neutral 100 level, the index confirms that the speech adds hawkish pressure to US dollar expectations, consistent with the firmer tone recorded by the FXS Speechtracker.

100-Day SMA Caps Gold: Technical Outlook Remains Bearish

Below all the major referenced bands and the 100-day simple moving average (SMA), XAU/USD continues to decline on the daily chart, leaving the metal under pronounced bearish pressure. Trading beneath both the Bollinger Bands’ middle line and lower band points to a strong downside breakout. Meanwhile, the Relative Strength Index (14) stands at 32, just above oversold territory. This suggests selling momentum is stretched, but has yet to reverse.

Any recovery first faces resistance around $3,910 at the lower Bollinger band. The middle band near $4,085 then presents the first substantial recovery obstacle. Further up, the 100-day SMA at $4,210 and the upper Bollinger band at $4,265 create a concentrated resistance zone. Reclaiming these levels would be necessary to reduce the prevailing bearish bias and clear a path towards a more sustained rebound.

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