Gold (XAU/USD) began the week under pressure but reversed course as US Treasury bond yields dropped sharply. The economic calendar for the upcoming week lacks high-impact data, and the Federal Reserve's blackout period may limit volatility. Geopolitical tensions in the Middle East escalated, but limited volatility kept Gold's movements subdued.
The US Consumer Price Index (CPI) rose to 3.7% in September, above expectations, increasing the probability of a Fed rate hike to 40%. This strengthened the USD and pushed Gold down over 1% to near $4,100. However, Gold rebounded 1.6% as US bond yields declined, partly due to reports of China shifting its US debt holdings to Canada.
Fed Chair Kevin Warsh's speech at an IMF event further lowered bond yields, reducing the likelihood of an October rate hike to 10%. Warsh's cautious optimism kept the Fed open to tightening without pre-committing to a policy path. Investors will focus on bond markets and Middle East headlines, with Gold's recovery dependent on further yield declines.
Analysts at OCBC remain cautiously constructive on Gold, noting its sensitivity to bond market reactions rather than data itself. TD Securities highlighted strong support from moderating interest rates, USD strength, and robust ETF inflows. Technically, Gold's bullish reversal is unconfirmed, with key resistance at $4,190-$4,240 and support at $4,100.