Gold Pressured Near 2-Month Low as Dollar, Yields Surge

Key Moments

Gold Holds Weak Tone as Dollar Strength Persists

Gold (XAU/USD) remains under modest pressure heading into the European session, trading slightly lower on the day but still clinging to levels above the $4,100 area. That zone marks a two-month trough that was reached earlier on Tuesday. The ongoing bid for the US Dollar (USD) continues to weigh on the metal, even as some expectations for an additional Federal Reserve rate increase in October have eased, providing only a partial offset for the non-yielding asset.

Economic data published in the United States last week indicated slower inflation and signs of a mild cooling in labor market conditions. At the same time, crude oil prices are trading near a four-week low, as steady crude flows from the Middle East and the deployment of a G7 emergency stockpile helped calm supply concerns. Together, these developments have reduced immediate pressure on the Federal Reserve to push rates higher.

Nonetheless, market pricing still reflects more than an 85% probability that the Fed will deliver at least one more interest rate increase before the end of the year, maintaining a broadly hawkish policy backdrop for gold.

Fed Outlook: Deutsche Bank Sees Further Hikes Despite Softer Payrolls

Commentary from Deutsche Bank suggests that the latest moderation in headline payroll growth has not materially changed the underlying labor market narrative. Economists at the bank argue that the disappointing headline number contrasts with broader labor indicators that remain comparatively firm.

They note that “although the headline payroll number was disappointing, the wider labour-market picture remains relatively resilient, particularly alongside recent ADP and jobless-claims readings,” and on that basis their team “continue to expect two further 25bp Fed hikes over the next couple of quarters.”

In terms of market-based expectations, Deutsche Bank highlight that “the market is pricing in another 86bps over the next 12 months, down from 100bps early last week but up from 70bps just after the payroll release,” illustrating that while expectations have cooled somewhat, they still lean clearly toward additional tightening.

Geopolitics and Yields Support the Dollar, Pressure Gold

Beyond Fed expectations, a combination of geopolitical risks and higher US bond yields is keeping the USD close to its strongest level since April 2025, a peak reached on Monday. That backdrop continues to suppress appetite for gold.

On the geopolitical front, the Iran-backed Houthi group in Yemen stated that it had launched three military operations using ballistic and cruise missiles as well as drones against airports, an oil facility, and military positions across Saudi Arabia. In response, the Saudi-led coalition operating in Yemen reported that it had destroyed a ballistic missile launch platform in Sanaa, as well as a storage site in a mountainous area in Saada.

Further adding to the risk premium, media reports indicate that Israel is preparing for a potential strike on Iran, which could be conducted jointly with the United States or separately. Such a move would raise the prospect of a broader escalation in Middle Eastern tensions.

Separately, a deepening fiscal shock in France has triggered a prolonged selloff in fixed income markets, pushing US bond yields toward multi-year highs. The resulting yield advantage has lent additional support to the Greenback. Taken together, these dynamics point to a prevailing downside bias for gold, even if some sellers may be waiting for stronger policy signals from the Fed before committing to more aggressive positions.

Focus Turns to FOMC Minutes and Fed Speakers

Market participants are now looking ahead to the release of the Federal Open Market Committee (FOMC) Minutes on Wednesday for more detail on policymakers’ assessment of inflation, growth, and the appropriate policy stance. Comments from key FOMC officials, along with incoming geopolitical developments, are also expected to have a significant influence on the USD and, by extension, on XAU/USD.

Given the current backdrop, the fundamental setup is seen as supportive of an eventual downside break in gold below the lower end of the trading range that has contained prices over roughly the past week.

XAU/USD Technical Picture: Bias Remains to the Downside

From a technical standpoint, the decline from the August swing high has transitioned into a period of sideways trade that still resembles a consolidation phase within a broader bearish structure. The Moving Average Convergence Divergence (MACD) indicator is holding below the zero line, and the Relative Strength Index (RSI) around 38 points to weak momentum that favors further downside rather than signaling a clear oversold condition.

For sellers to gain stronger conviction, a decisive break below the current range and under the 78.6% Fibonacci retracement at $4,098 would be needed, opening the door to a move toward the prior structural floor around the previous cycle low near $3,936.

On the upside, several resistance levels are in play. Initial resistance is seen at the 61.8% Fibonacci retracement at $4,226, closely followed by the 100-period Simple Moving Average (SMA) on the 4-hour chart at $4,254. Above that, the 50.0% retracement near $4,316 represents another hurdle, with higher Fibonacci levels at $4,406 and $4,517 standing in the way before any potential retest of the distant swing high around $4,696.