Gold Struggles as Dollar Strength and Yields Weigh on Prices

Gold prices have shown some recovery but remain under pressure due to high oil prices, rising bond yields, and a strong US dollar. The precious metal needs to reclaim the $4,220-$4,235 range to improve its short-term outlook. Central bank demand continues to support gold's longer-term bullish case, providing a structural floor despite near-term challenges.

Gold initially bounced on Monday following softer-than-expected US jobs data, but the rally stalled near $4,220 before reversing. While weaker employment figures may have reduced some rate hike expectations, they have not altered the broader inflation-driven macro backdrop. The Federal Reserve remains focused on curbing inflation, which keeps the near-term outlook for gold tilted to the downside.

Elevated oil prices are complicating the inflation narrative, keeping pressure on bond yields and the dollar. Higher Treasury yields increase the opportunity cost of holding non-yielding assets like gold, while a stronger dollar adds direct pressure. The next major test for gold will be the US inflation data on October 14, which could reinforce or challenge current market expectations.

Technically, gold remains vulnerable, trading below its short-term bearish trend line. A sustained break above $4,220-$4,235 would shift the technical picture back to bullish, with the next focus on $4,280-$4,300. On the downside, $4,100-$4,120 is a key support level, with a break below potentially targeting $4,000. Despite the near-term bearish setup, central bank demand and fiscal sustainability concerns provide longer-term support for gold.