$4,150 in Focus: Gold Struggles Amid Global Rate Hike Risks

• 0.43% lower: Gold retreats despite a fall in US Treasury yields.
• 14% odds of an October Fed rate rise contrast with higher December expectations.
• Tightening signals from the BoE and BoJ cloud the outlook for an XAU recovery.

$4,122 is the latest price for Gold (XAU/USD), down over 0.43%. The metal edges lower on Tuesday despite sharply falling US Treasury yields and a softer US Dollar. Investors have largely disregarded a thin US economic calendar ahead of next week’s Federal Reserve (Fed) meeting.

XAU/USD edges lower as central bank tightening signals offset weaker Dollar and yields

A 14% probability of an October Fed rate rise is priced into money markets, compared with near 90% for December, according to Prime Terminal. Bullion looks set for further consolidation as investors weigh last week’s comments from Fed officials indicating no urgency to raise rates in October.

With little on this week’s US economic calendar, Fed officials have entered their blackout period. It concludes with Fed Chair Kevin Warsh’s press conference on 28 October.

US housing figures are drawing investors’ attention as they reveal the impact of higher US bond yields. Elevated mortgage rates were the main driver of a 7.3% plunge in US Pending Home Sales in September. Later this week, the focus turns to Initial Jobless Claims for the week ending on Thursday, with an increase from 199K to 200K forecast. S&P Global Flash PMIs will also offer a snapshot of US business sentiment, alongside the final October reading of the University of Michigan Consumer Sentiment Index.

Major central banks face expectations of further rate rises

Further monetary tightening is being signalled by officials at major central banks. That presents a headwind for Gold, which typically performs well when interest rates are low.

Although Bank of Japan (BoJ) Governor Kazuo Ueda acknowledged that core inflation was “quite close” to the 2% target, he hinted at additional rate rises. Megan Greene of the Bank of England (BoE) said the risks of second-round inflation effects were greater than previously thought. She added that the current policy stance “is not restrictive enough.”

$4,200 caps Gold as $4,100 comes into focus: XAU/USD technical analysis

Between $4,100 and $4,200, Gold remains range-bound while extending its decline into a third consecutive day. Signs of a potential bottom have emerged near the range’s lower boundary. However, uncertainty still weighs on bullion, amid speculation about a possible Fed rate rise in December.

The Relative Strength Index (RSI) has levelled off somewhat but remains bearish, leaving momentum tilted towards further losses.

A break below $4,100 is needed for sellers to extend the decline. That would bring the 14 October low of $4,073 into view, followed by the 29 July cycle low of $3,996. Further losses would put the 17 July low at $3,959 and the year-to-date (YTD) low of $3,941 in focus.

A bullish reversal would first confront resistance at $4,200 for XAU/USD, then the 100-day Simple Moving Average (SMA) at $4,235. Beyond those levels lie the 50-day SMA at $4,321 and, higher still, $4,500.