Gold Stuck in Range as Strong Dollar and High Yields Offset Fed Rate Hike Expectations

Gold prices are stuck in a tight range as a stronger US dollar and high Treasury yields counterbalance easing expectations of a Federal Reserve rate hike. On October 5, spot gold dipped 0.30% to $4,128.02, struggling for direction. The US dollar's strength and elevated Treasury yields are weighing on gold, while diminished Fed rate hike expectations provide some support.

The latest US business survey data did little to change the outlook. The S&P Global Services PMI was revised slightly higher to 58.8, while the ISM Services PMI dropped to 54.9, missing expectations. Earlier, weaker-than-expected employment data, including a 29,000 rise in nonfarm payrolls and a higher unemployment rate, has lowered the probability of a Fed rate hike in October to around 20%. However, persistent inflation concerns keep the Fed's policy leaning toward further tightening, which limits gold's upside.

Deutsche Bank economists noted that despite the disappointing nonfarm payrolls report, the labor market remains resilient. They still expect two more rate hikes in the coming quarters. Meanwhile, political tensions in France have weakened the euro, boosting the US dollar index to a high of 102.53. The benchmark US 10-year Treasury yield remains near 5.30%, increasing the opportunity cost of holding gold.

Looking ahead, traders will watch for the September FOMC meeting minutes, initial jobless claims data, and consumer sentiment reports. On the 4-hour chart, spot gold is trading below key moving averages, with resistance at $4,160 and $4,264.50. The RSI and MACD indicators suggest weak momentum, with bears still in control.