Gold Recovers Above $4,100 Amid Softer Yields and Weaker Dollar
Gold prices stabilized above $4,100 after hitting a two-month low of $4,104 during Asian trading. The rebound came as softer US Treasury yields and a weaker US Dollar Index provided support, lifting XAU/USD to approximately $4,173, up 0.82% on the session. The 10-year Treasury yield eased to around 5.269% after reaching a high of 5.349% on Monday, while the US Dollar Index retreated from a year-to-date peak of 102.53 to 101.80. Despite this recovery, gold remained range-bound between $4,100 and $4,200, with high interest rate expectations and elevated borrowing costs limiting further gains.
US labor data showed a slight improvement, with ADP’s four-week average of private-sector job gains rising to 23.75K from 22.5K. The CME FedWatch Tool indicated a 78% probability of the Federal Reserve maintaining interest rates at its October 27-28 meeting, following softer nonfarm payrolls and PCE inflation readings. Oil prices also influenced market sentiment, with WTI trading near one-month lows around $87, despite lingering energy inflation risks.
From a technical standpoint, gold held below the 20-day Bollinger SMA at $4,263, with the RSI around 40 and MACD remaining negative. Key support levels include $4,100, $4,087, and the $4,000-$3,950 zone, while resistance is stacked at $4,263, $4,439, $4,500, and $4,700. Analysts recommend short-term range-bound strategies, cautioning that elevated borrowing costs could restrict upside potential.
Historically, Treasury yields above 5% have posed challenges for precious metals, similar to conditions seen in 2002. However, consistent institutional demand, with global central banks buying over 1,000 metric tons of gold annually, provides a macroeconomic floor. Looking ahead, traders should prepare for volatility around the FOMC minutes and the late-October central bank meeting, with options strategies like straddles suggested to capitalize on potential sharp movements.