Gold Dips Near Two-Month Low as Dollar Strength Persists

Gold prices are trading just above $4,100, after briefly dipping to a two-month low earlier this week. The drop comes as the U.S. dollar strengthens and bond yields rise, putting pressure on the non-yielding asset. While expectations for an October rate hike have eased, markets still price in an 85% chance of at least one more Federal Reserve increase by year-end.

Deutsche Bank analysts argue that despite softer payroll numbers, broader labor indicators remain strong, supporting their forecast for two additional 25 basis point hikes. Market pricing reflects a consensus leaning toward further tightening, though with slightly reduced expectations compared to earlier in the month.

Geopolitical tensions in the Middle East and a deepening fiscal crisis in France are boosting the dollar’s appeal as a safe-haven asset. Meanwhile, crude oil prices have softened, reducing some inflationary pressures that might have otherwise pushed the Fed toward more aggressive tightening. Still, the combination of a strong dollar and higher yields continues to weigh on gold.

Traders are now focusing on the Federal Open Market Committee (FOMC) minutes due out Wednesday, along with upcoming Fed speeches, for clearer guidance on future rate moves. Technically, gold’s downtrend shows weak momentum, with key support at $4,098 and resistance levels at $4,226 and $4,254.