Gold Dips Below 4,150 as Rising Yields Counter Fed Relief

Gold prices faced a setback on Monday, slipping below the $4,150 mark as rising US Treasury yields and a stronger US Dollar weighed on the precious metal. Despite expectations of a less aggressive Federal Reserve and a reduced likelihood of a rate hike in October, gold failed to capitalize on this dovish sentiment. At the time of writing, XAU/USD was trading at $4,132, down 0.27%.

The market's upbeat mood and the surge in the US 10-year Treasury yield, which climbed six basis points to 5.341%, further dampened gold's safe-haven appeal. The US Dollar Index (DXY) also gained 0.25%, reaching 102.17, adding to the pressure on gold. Meanwhile, the US services sector showed a slight decline, with the ISM Services PMI dropping from 55.4 to 54.9 in September, though input costs continued to rise.

Last week's mostly unchanged Core PCE inflation gauge led investors to trim their hawkish bets on the Fed, briefly boosting gold prices. However, the odds of a rate hike in December remain high at 88%, according to Prime Terminal data. The September Nonfarm Payrolls report, which came in lower than expected, initially pushed gold to a weekly high of $4,227 before sellers drove prices back below $4,150.

Technical analysis suggests gold may continue to consolidate below $4,150, with the next support level at $4,100. The Relative Strength Index (RSI) remains bearish, indicating potential further downside. If gold breaks below $4,100, it could target $4,000 and then the year-to-date low of $3,941. For a bullish reversal, gold would need to surpass $4,200 and clear the 100- and 50-day Simple Moving Averages at $4,274 and $4,327, respectively.