Gold Dips as Rising Yields Weigh on Fed Relief Hopes

Gold prices are retreating slightly on Monday, as rising US Treasury yields and a stronger US Dollar counterbalance investor expectations of a less aggressive Federal Reserve. At the time of writing, Gold (XAU/USD) is trading at $4,132, down 0.27% on the day. The precious metal has failed to capitalize on the recent shift in market sentiment, which now largely rules out a Fed rate hike this month.

The upbeat market mood is limiting demand for Gold as a safe-haven asset, while the US 10-year Treasury yield has climbed six basis points to 5.341%, reinforcing the Dollar's strength. The US Dollar Index (DXY) is up 0.25% at 102.17, further pressuring Gold. Meanwhile, economic data shows a slight decline in US services sector activity, with the ISM Services PMI dropping from 55.4 to 54.9 in September, though input costs continued to rise.

Despite last week’s relatively unchanged Core PCE inflation data, which reduced Fed rate hike expectations, Gold’s rally was short-lived. Investors now price in a 77% chance of no rate change in October, but a December hike is seen as highly likely, with an 88% probability. Friday’s weaker-than-expected Nonfarm Payrolls report briefly boosted Gold to $4,227 before sellers pushed it back below the $4,150 mark.

Technically, Gold appears poised for further consolidation below $4,150, with the next key support level at $4,100. The Relative Strength Index (RSI) remains in bearish territory, suggesting potential downside momentum. A break below $4,100 could target $4,000 and eventually the year-to-date low of $3,941. On the upside, bulls would need to push past $4,200 to challenge higher resistance levels.