Gold Struggles as US Dollar Hits New Yearly High on Geopolitical Tensions
Gold (XAU/USD) is struggling to gain traction on Monday, hovering just below $4,150 as the US Dollar (USD) surges to a fresh yearly high since April 2025. The USD's rally is capping gold's upside, despite easing bets for an October interest rate hike by the Federal Reserve (Fed). The recent US Nonfarm Payrolls (NFP) report showed weaker-than-expected job growth, with only 29K new jobs added in September, down from a revised 133K in August. The Unemployment Rate also rose to 4.2%, while annual wage growth slowed to 3.0%, matching the lowest pace since May 2021. These figures, combined with softer US inflation data, have reduced pressure on the Fed to raise rates, which is providing some support to gold.
Analysts at ABN Amro view the latest US labor market report as consistent with their expectations, noting that the three-month average job growth of 51K is solid but does not indicate a tight market. They argue that the softer employment data, along with the recent downside surprise in the PCE report, removes pressure for an October rate hike. However, ABN Amro still expects one more Fed hike in December to address persistent inflationary pressures from the energy shock.
The CME Group's FedWatch Tool indicates that traders are pricing in around an 85% chance of a Fed rate hike by the end of the year. Meanwhile, geopolitical tensions in the Middle East and the widening Russia-Ukraine war are boosting the safe-haven USD. Recent developments include Iran's readiness to return to war and Yemen's military operations against the Houthis, as well as deadly Russian air strikes on Ukrainian regions. These conflicts are keeping the geopolitical risk premium elevated, which favors USD bulls and warrants caution for gold investors.
Technically, gold maintains a bearish near-term tone, trading below the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 61.8% Fibonacci retracement level at $4,225.30. The Relative Strength Index (RSI) hovers below the midline, while the Moving Average Convergence Divergence (MACD) indicator has slipped into negative territory. This suggests waning upside momentum and reinforces the idea of gold being capped by overhead resistance. Immediate support is seen at the 78.6% Fibonacci retracement level at $4,098, with a more important structural floor near the prior swing low at $3,936.