Gold prices rebounded to near $3,895 during early Asian trading on Monday, recovering from a drop to $3,870 in the previous session. The uptick came despite persistent inflation concerns and elevated oil prices, which have reinforced expectations of a US interest rate hike in December. Markets are pricing in a 72.9% probability of a rate increase, according to the CME FedWatch tool, which could increase the opportunity cost of holding non-yielding gold.
The latest sell-off in gold was driven by ongoing tensions in the Middle East, upcoming US employment data, and the midterm elections, all of which are expected to add volatility to financial markets. Ukraine’s resumed attacks on Russian oil refineries and Iran’s Supreme Leader’s call for military preparedness against the US and Israel have further heightened geopolitical risks.
Strategists at OCBC noted that gold’s recent recovery has faltered, with prices slipping back toward lows of $4,000 despite some easing in US Treasury yields and oil prices. They highlighted that September’s core PCE data and stronger 3Q26 GDP reinforced the resilience of the US economy, offering little reason to pare expectations of a Fed hike in December. OCBC remains cautious, suggesting further consolidation or another test of recent lows.
Fed’s Logan delivered a hawkish message, emphasizing the need for at least two more quarter-point rate hikes to make policy ‘modestly restrictive.’ The FXS Fed Sentiment Index rose to 143.62, firmly in hawkish territory, confirming incremental pressure on Dollar expectations. Technically, gold remains under bearish pressure, trading below the 100-day SMA and Bollinger Bands, with initial resistance at $3,910.