Gold rebounds to near $3,900 despite inflation worries

• Gold price rebounds to around $3,895 in Monday’s early Asian session.
• Higher oil prices fuel inflation fears, supporting Fed rate hike bets.
• Markets still expect the Fed to raise interest rates in December.

Gold price (XAU/USD) recovers some lost ground to near $3,895 during the early Asian trading hours on Monday. The precious metal edges higher after falling to its lowest level of $3,870 in the previous session. However, the potential upside seems limited as elevated oil prices and inflation concerns have reinforced expectations of a US interest rate hike.

The latest sell-off came as traders brace for another potentially volatile week, with ongoing tensions in the Middle East, US employment data and the midterm elections expected to provide fresh uncertainty for financial markets.

The Guardian reported that Ukraine has resumed its attacks on Russian oil refineries in defiance of pressure from US President Donald Trump ahead of the US midterm elections, ending a pause of about two weeks in such attacks. Meanwhile, Iran’s Supreme Leader ordered his top military commanders to prepare for renewed confrontation with the US and Israel.

Although the Federal Reserve (Fed) held interest rates steady at its October policy meeting, the US central bank remains committed to bringing inflation down. Markets are now pricing in ‌about a 72.9% probability of a US rate hike in December, according to the CME FedWatch tool. Higher interest rates increase the opportunity cost of holding non-yielding gold.

“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,” said Simon-Peter Massabni, Head of Business Development at XS.com.

Gold struggles to capitalize on softer yields as Fed hike risks linger

Strategists at OCBC highlight that gold’s recent recovery has faltered, with prices “slipping back towards lows of 4000 despite some easing in US Treasury yields and oil prices.” 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,” and argue that this data “offered little reason for markets to meaningfully pare expectations of another Fed hike in December, following this week’s policy hold.”

More notably, OCBC points out that “gold’s inability to benefit from lower yields suggests that fresh buying interest remains limited, even as earlier liquidation pressures may be easing.” They add that “renewed weakness in technology equities also weighed on sentiment as it raises concerns over another bout of broader deleveraging.”

Against this backdrop, OCBC says, “we remain cautious near term, with further consolidation or another test of recent lows not ruled out,” and flag that “Friday’s Employment Cost Index and the direction of equities, yields and USD will be important to watch.”

Logan flags at least two more hikes, reinforcing hawkish Fed path

Fed’s Logan delivers a distinctly hawkish message, with an FXS Speechtracker score of 8/10, slightly above the 7.7/10 historical average and signaling firmer conviction on the need for tighter policy. The insistence that the Fed “needs at least two more quarter-point rate hikes” and that skipping a meeting does not alter the policy destination underscores a clear commitment to making policy “modestly restrictive,” especially with inflation still deemed “unacceptable” relative to the 2% target. Emphasis on gradual adjustment and clarity around the rate destination aims to limit downside risks while allowing households, businesses, and investors to adapt to higher Dollar rates amid strong growth and a balanced, potentially tightening labor market.

The FXS Fed Sentiment Index rises by 0.95 points to 143.62, firmly in hawkish territory and consistent with Logan’s call for additional tightening despite the possibility of a near-term pause. This elevated index level, well above the neutral 100 mark, confirms that the speech adds incremental hawkish pressure to Dollar expectations, aligning with the stronger tone captured by the FXS Speechtracker.

Technical Analysis: Gold keeps a bearish vibe under the 100-day SMA

In the daily chart, XAU/USD extends its decline beneath all major referenced bands and the 100-day simple moving average (SMA), which keeps the metal under clear bearish pressure. Price also holds below the Bollinger Bands middle line and even the lower band, suggesting a strong downside breakout, while the Relative Strength Index (14) at 32 hovers just above oversold territory, hinting that bearish momentum is stretched but not yet reversing.

On the topside, initial resistance emerges at the Bollinger lower band around $3,910, followed by the mid-band near $4,085 as the first meaningful recovery hurdle. Above these, the 100-day SMA at $4,210 and the Bollinger upper band at $4,265 form a dense cap that would need to be reclaimed to ease the current bearish bias and open the way for a more sustainable rebound.

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