Gold falls to two‑month low near $4,100 on stronger US Dollar
- Gold price slumps to near $4,110 in Thursday’s early Asian session.
- Elevated US Treasury bond yields and firmer USD weigh on the Gold price.
- Fed Minutes showed policymakers backed the September decision to raise interest rates.
Gold price (XAU/USD) tumbles to a near two-month low around $4,110 during the early Asian session on Thursday. A stronger US Dollar (USD) and elevated US Treasury bond yields reduce the appeal of the non-yielding metal. Traders will take more cues from the speeches of Federal Reserve (Fed) officials, including Christopher Waller and Alberto Musalem.
The benchmark US Treasury yields climbed again and are trading near their highest levels since 2002. Meanwhile, the greenback strengthened, making USD-denominated gold more expensive for holders of other currencies. A spike in oil prices also reignited concerns over inflation and the prospect of higher interest rates.
According to the Minutes from the last Fed meeting, policymakers were united in backing their September hike, and most officials assessed that another hike would be appropriate by year-end.
Markets are largely expecting the US central bank to keep interest rates on hold later at its October policy meeting but are still pricing in a 78.3% probability of a December increase, according to CME's FedWatch tool.
"I think the message is rates are going to continue to be higher for longer, and that's keeping yields and the dollar underpinned," said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Gold finds support as PBoC buying and ETF inflows offset cta pressure
According to TD Securities, “precious metals come under heavy selling pressure, with CTAs selling gold, silver and platinum,” leaving the complex on the defensive as “the yellow metal is on the back foot again this morning amid surging real rates and a stronger Dollar.” Even so, the bank argues that “we expect a strong dip buying impulse for gold in particular as longer-term drivers and flows remain supportive,” pointing to the fact that “ETF accumulation continues and the PBoC reported a 23rd consecutive month of central bank buying, with another 23 tonnes in September.”
TD Securities highlights that “a continued bid from discretionary traders, ETFs, and central banks all combine to provide a strong floor for gold,” with the underlying “drivers of these flows” ranging from “geopolitical risk, fiscal concern, Dollar debasement, de-dollarization and stagflation concerns.” In their view, “we expect the appetite to be more persistent and ultimately hold firm in the face of surging real rates,” and “continue to see the stage being set for gold to disconnect from real rates further and begin a new bull run into 2027.”
Fed’s Schmid flags AI-driven inflation and signals more short-rate tightening
Fed’s Schmid delivers a notably hawkish tone, with an 8/10 FXS Speechtracker score standing above the 7.5/10 historical average, underscoring a stronger-than-usual focus on inflation risks. The emphasis that inflation is “frustrating” and “must be fixed,” alongside the assertion that AI is now one of the largest drivers of inflation and that the Fed’s credibility is at stake, reinforces a message of persistent price pressures and a readiness to act. The comment that the Fed still has work to do on the short rate despite higher long-term yields signals a bias toward keeping policy tight or tightening further, a backdrop typically supportive of the Dollar and a headwind for risk-sensitive currencies.
The FXS Fed Sentiment Index rose by 0.34 points to 137.91, keeping the gauge firmly in hawkish territory well above the neutral 100 mark. This incremental move higher, aligned with the above-baseline FXS Speechtracker score, confirms that Fed communication is tilting more hawkish at the margin, reinforcing expectations for sustained restrictive policy.
Technical Analysis: Gold remains capped below the 100-day SMA
In the daily chart, XAU/USD remains under clear bearish pressure, as it holds below the 100-day simple moving average (SMA) and also below the Bollinger Bands’ middle line, keeping the broader trend capped. Price is hovering just above the lower Bollinger Band support, while the Relative Strength Index (14) at 37.09 slips toward oversold territory, hinting at persistent downside momentum rather than an imminent recovery.
On the downside, immediate support is located at the Bollinger Bands’ lower band near $4,070, where a sustained break would open the door to further declines toward lower psychological levels. On the topside, initial resistance comes at the Bollinger middle band at $4,250, followed by the 100-day SMA at $4,265; a daily close above these overlapping barriers would be needed to ease the bearish bias, with the upper Bollinger Band around $4,424.82 acting as a higher hurdle for any corrective bounce.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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