Gold Rebounding as Treasury Yields and Dollar Retreat
Gold (XAU/USD) has rebounded on Tuesday, recovering from a two-month low of $4,104 reached during Asian trading. At the time of writing, the precious metal is trading around $4,156, up 0.41% for the day. This rebound comes as the benchmark 10-year US Treasury yield eased to around 5.269%, down from a high of 5.349% on Monday, its highest level since 2002. The US Dollar Index (DXY) also retreated toward 102.00 after hitting a fresh year-to-date high of 102.53 the previous day.
The pullback in yields and the US Dollar provided some relief for gold, although the metal remains confined within a narrow range of $4,100 to $4,200. Buyers have struggled to sustain a recovery as yields remain near multi-year highs. Elevated yields increase the opportunity cost of holding non-yielding gold, supporting the demand for the US Dollar. Factors such as sticky inflation, rising government debt concerns, and a resilient US growth outlook have pushed borrowing costs higher, reinforcing expectations that interest rates will stay elevated for longer.
Recent US employment figures and the Federal Reserve's preferred inflation measure have shown signs of cooling, reducing pressure on the central bank to raise interest rates at the October 27-28 meeting. The CME FedWatch Tool indicates an 80% chance of a rate hold in October. However, a broader recovery for gold may remain difficult as markets anticipate further tightening. The Fed's commitment to bringing inflation back to its 2% target keeps the possibility of a December rate hike open.
Technical analysis suggests that XAU/USD maintains a bearish near-term tone as it holds below the 20-day Bollinger simple moving average (SMA) at $4,263. Momentum is soft, with the Relative Strength Index (RSI) hovering around 40, and the Moving Average Convergence Divergence (MACD) remaining in negative territory. Initial demand is seen near the psychological $4,100 level, with a break below potentially exposing deeper support around $4,000-$3,950. On the topside, resistance is noted at the mid-Bollinger SMA at $4,263, ahead of upper band resistance near $4,439 and horizontal barriers at $4,500 and $4,700.