Dollar Strength and Inflation Concerns Weigh on Gold as PCE Reports Loom

The US Dollar Index (DXY) has been holding steady near 101.37, following its earlier test at 101.49 on Tuesday. This stability is attributed to dollar buyers who are working off a rate outlook that is also weighing on gold.

The CME FedWatch reading for October indicates a 68.1% probability of a quarter-point hike, down from the 70% area on Monday. This suggests that until these odds cool down, gold may not experience more than a short-covering bounce.

Higher oil prices are also working against gold as they are perceived as an inflation problem, sending traders back to the Fed. As long as yields continue to climb, this narrative of inflation will remain dominant over any geopolitical concerns for gold.

The daily spot gold (XAU/USD) chart shows a downtrend, with Monday's low at $4,110.87 serving as an immediate downside trigger. The 50-day moving average at $4,321.39 and the long-term retracement zone of $4,319.61 to $4,230.51 are also significant levels for gold.