Gold extends gains above $4,400 as sliding bond yields and soft USD counter Fed hike bets

• Gold attracts some follow-through buyers for the second straight day amid a weak USD.
• Wednesday’s soft US ADP report and retreating US bond yields weigh on the Greenback.
• Fed hike bets and geopolitical tensions could limit USD losses and cap the XAU/USD pair.

Gold (XAU/USD) is seen building on the previous day's goodish recovery from the $4,282 area, or a nearly four-week low, and gaining some follow-through positive traction for the second straight day on Thursday. The momentum lifts the commodity further beyond the $4,400 mark during the Asian session as retreating US bond yields undermine the US Dollar (USD). That said, firming US Federal Reserve (Fed) rate hike expectations and inflation risks stemming from higher energy prices could act as a tailwind for US bond yields. Apart from this, geopolitical uncertainties could support the safe-haven USD, warranting caution before positioning for any further appreciating move for the precious metal.

According to CME Group's FedWatch Tool, traders are pricing in around a 62% chance that the US central bank will hike rates at its upcoming September 15-16 policy meeting. The expectations were lifted by Fed Chair Kevin Warsh's hawkish remarks last Friday. Moreover, worries that rising energy prices will rekindle inflationary pressures back the case for Fed tightening, which could limit the USD's corrective slide and cap the non-yielding bullion. In fact, crude oil prices trade near the highest level since July 24, touched on Wednesday, as tensions between the US and Iran have flared up after fresh US strikes on Iranian targets and retaliatory drone and missile attacks by Tehran across the Gulf region.

Furthermore, US President Donald Trump said on Wednesday that he is prepared to launch another attack on Iran. This, along with continued clashes over the Strait of Hormuz, keeps the geopolitical risk premium in play, which should continue to support oil prices and the USD. Hence, it will be prudent to wait for strong follow-through buying before confirming that the Gold price has bottomed out in the near term and placing fresh bullish bets. Traders might also opt to wait for the release of the crucial US Nonfarm Payrolls (NFP) report on Friday, which will be looked at for more cues about the Fed's future policy path and help in determining the next leg of a directional move for the XAU/USD pair.

XAU/USD 4-hour chart

Technical Analysis

The overnight close above the 23.6% Fibonacci retracement level of the recent corrective slide from an over three-month peak, set in August, and the subsequent move up back the case for further gains. That said, the 38.2% retracement at $4,438 is the first cap, reinforcing the idea of a corrective bounce within a broader downside phase. Furthermore, the Moving Average Convergence Divergence (MACD) indicator turns positive and the Relative Strength Index (RSI) hovers near 49, hinting at stabilizing but not yet bullish momentum.

A move beyond the 38.2% Fibonacci level, however, should pave the way for a move toward the 100-period SMA at $4,480, the 50.0% retracement at $4,487, the 61.8% level at $4,535, and, later, $4,604 and $4,692. On the downside, immediate support emerges at the 23.6% retracement at $4,378, while a deeper pullback would expose the Fibonacci-derived structural floor near $4,282.

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