Gold nudges up to near $3,900 as investors weigh inflation and rate-rise risks
Gold recovered to around $3,895 in early Asian trade, but higher oil prices and inflation concerns keep expectations of a U.S. rate hike elevated.
Gold rose to about $3,895 in early Asian trading on Monday, recouping some of the losses that saw the metal dip to $3,870 the day before. The modest gain was limited by persistent inflation worries and elevated oil prices, which have reinforced market expectations of a U.S. interest-rate increase in December.
Traders face a volatile week ahead, with Middle-East tensions, U.S. employment data and the upcoming midterm elections adding uncertainty to financial markets. The Guardian reported that Ukraine resumed attacks on Russian oil refineries despite pressure from President Donald Trump ahead of the elections, while Iran’s Supreme Leader ordered military commanders to prepare for renewed confrontation with the United States and Israel.
Although the Federal Reserve kept rates steady at its October meeting, the central bank remains focused on lowering inflation. The CME FedWatch tool shows a roughly 73% probability of a rate hike in December, raising 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.
Strategists at OCBC noted that gold’s recent recovery has stalled, with prices slipping back toward $4,000 despite some easing in U.S. Treasury yields and oil prices. They pointed to September core PCE inflation at 3.1% year-on-year and stronger third-quarter GDP as reasons markets still anticipate another Fed hike in December. OCBC added that gold’s inability to benefit from lower yields suggests limited fresh buying interest, and that weakness in technology stocks raises concerns about broader deleveraging. The firm remains cautious, warning that further consolidation or another test of recent lows is possible, and highlighted the upcoming Employment Cost Index and movements in equities, yields and the dollar as key indicators.
Fed Governor Christopher Logan delivered a hawkish message, indicating the need for at least two more quarter-point rate hikes and emphasizing that skipping a meeting would not change the policy trajectory. The FXS Fed Sentiment Index rose to 143.62, well above the neutral level, reflecting increased pressure on dollar expectations.
Technical analysis shows XAU/USD trading below the 100-day simple moving average and the lower Bollinger Band, keeping the metal under bearish pressure. Resistance is seen near $3,910 and $4,085, with the 100-day SMA at $4,210 and the upper Bollinger Band at $4,265 forming a higher barrier to a sustained rebound.