Gold Gains Capped by Strong Dollar and Fed Tightening Bets

Gold (XAU/USD) is seeing modest gains as weaker US economic data reduces the likelihood of a Federal Reserve rate hike in October. The precious metal is trading around $4,158, up 0.35% on the day, but remains constrained by a stronger US Dollar and elevated Treasury yields.

Recent US employment figures, including Nonfarm Payrolls increasing by just 29K in September, far below the 90K forecast, have lowered expectations for an October Fed rate hike to around 20%. However, persistent inflation risks keep the broader policy outlook tilted toward further tightening, limiting gold's upside.

Economists at Deutsche Bank note that despite the weak payroll data, the labor market remains resilient, maintaining their outlook for two additional 25 basis point Fed hikes in the coming quarters. Meanwhile, the US Dollar Index (DXY) has risen to its highest level since April 2025, supported by political concerns in France, while the 10-year US Treasury yield hovers near 5.29%.

Technically, gold is struggling to reclaim the $4,200 level, with immediate support at $4,100. A break below this level could intensify selling pressure, while a sustained move above $4,200 would need to clear key moving averages to strengthen the bullish outlook.