At the time of writing, XAU/USD trades little changed around $4,280 after falling to a one-week low near $4,244 on Thursday, leaving it on track for a weekly loss.
Bets on another rate increase as early as next month gained traction throughout the week after strong US Purchasing Managers’ Index (PMI) data and hawkish comments from Fed officials.
A stronger US Dollar makes Gold more expensive for foreign buyers, while higher yields increase the opportunity cost of holding the non-yielding metal.
The Consumer Expectations Index increased to 46.3 from 45.8.
However, 1-year inflation expectations held at 4.6%, while the 5-year measure remained unchanged at 3.4%.
Gold (XAU/USD) reverses earlier intraday gains on Friday, failing to capitalize on a modest pullback in the US Dollar as growing expectations that the Federal Reserve (Fed) may raise interest rates again weigh on the non-yielding metal. At the time of writing, XAU/USD trades little changed around $4,280 after falling to a one-week low near $4,244 on Thursday, leaving it on track for a weekly loss.
The US central bank delivered a 25-basis-point (bps) rate hike last week, lifting the federal funds rate to 3.75%-4.00%, while its updated projections showed that 16 of 18 policymakers expect at least one more increase this year.
Bets on another rate increase as early as next month gained traction throughout the week after strong US Purchasing Managers’ Index (PMI) data and hawkish comments from Fed officials. New York Fed President John Williams said, “We need to get inflation back to target in a timely manner,” adding that it is “reasonable to see another rate hike by end of the year.” Richmond Fed President Tom Barkin said inflation pressures are spreading beyond energy and tariff-related shocks.
The CME FedWatch Tool now shows around a 71% probability of a hike at the October meeting. The repricing has driven a sharp rise in the US Dollar and Treasury yields across the curve. A stronger US Dollar makes Gold more expensive for foreign buyers, while higher yields increase the opportunity cost of holding the non-yielding metal.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101 after reaching 101.40 on Thursday, its highest level in nearly two months. Meanwhile, the benchmark 10-year US Treasury yield holds near 5.21%, below Thursday’s peak of 5.22%, its highest level since 2007.
Meanwhile, higher Oil prices caused by the war in the Middle East are adding to inflation pressures, complicating the Fed’s efforts to bring inflation down to the 2% target. Iran has offered to reopen the Strait of Hormuz within seven days if Washington eases military pressure and lifts its blockade. US and Iranian officials are also discussing a phased deal, but the two sides remain far apart and have not reached a breakthrough, Reuters reported.
On the data front, the final University of Michigan (UoM) Consumer Sentiment Index rose to 48.1 in September from 47.6, beating expectations of 47.8. The Consumer Expectations Index increased to 46.3 from 45.8. However, 1-year inflation expectations held at 4.6%, while the 5-year measure remained unchanged at 3.4%.
The US economic calendar becomes much heavier next week. Personal Consumption Expenditures (PCE) inflation data is due on Wednesday, followed by the ISM Manufacturing PMI on Thursday and the Nonfarm Payrolls (NFP) report on Friday. These releases could play a major role in shaping expectations for the Fed’s October meeting.
Technical Analysis: Bears retain control below key moving averages
On the daily chart, XAU/USD keeps a bearish near-term bias as it trades below the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), keeping sellers in control. Momentum indicators also lean bearish. The Relative Strength Index (RSI) at 44 sits in neutral territory, while the Moving Average Convergence Divergence (MACD) remains below zero, hinting that recovery attempts could stay limited while these moving averages act as overhead supply.
On the topside, initial resistance emerges at the 100-day SMA at $4,304, followed by the 50-day SMA at $4,317. A sustained break above these levels would be needed to ease immediate bearish pressure before the next upside hurdle at the 200-day SMA near $4,541 and the more distant horizontal barrier at $4,700.
On the downside, the nearest support is seen at the horizontal level of $4,150, ahead of a deeper structural base at $4,000, where sellers could hesitate if the current decline extends.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
