Gold traded in a narrow range near $4,140 during early Asian hours on Tuesday, holding its ground as upward pressure from a stronger US dollar and higher Treasury yields was balanced by a decline in expectations for a Federal Reserve rate hike this month. The metal has been caught between opposing forces: rising bond yields that reduce its appeal and a softer labour market report that has tempered hawkish bets.
US Treasury yields climb to multi-year highs
The benchmark 10-year Treasury yield rose about 7 basis points to 5.349% before pulling back to 5.30%, its highest level since April 2002. The 30-year bond yield also gained roughly 3 basis points to 5.661%, after touching 5.703% — a level not seen since late May 2002. Higher yields typically make yield-bearing assets like Treasuries more attractive relative to non-yielding gold, and the moves added to headwinds for the precious metal.
Fed rate hike expectations ease after payrolls
Pressure from yields was partly offset by a reassessment of Fed policy following Friday’s US Nonfarm Payrolls report. September payrolls came in weaker than expected, and figures for the prior two months were revised lower. Interest-rate swaps now imply roughly a 22.7% probability that the Fed will raise rates at its October meeting, according to the CME FedWatch tool — down from higher levels seen before the data. Traders are also awaiting the minutes of the September Federal Open Market Committee meeting, due Wednesday, which may offer further clues on the central bank’s policy path after it raised rates last month for the first time in three years.
Analysts see gold constrained by yields
Market analysts caution that lower rate hike risk alone may not be enough to drive gold higher. OCBC analysts note that the metal’s brief post-payrolls rebound faded quickly because long-end yields did not fall sustainably and the dollar remained firm. They argue that the key catalyst would be a sustained decline in long-end and real yields, driven by softer US data. Elevated oil prices complicate the picture by keeping inflation and term premium concerns alive, they add. Fawad Razaqzada, a market analyst at forex.com, suggested a near-term drop in gold could occur before buyers step in, citing the dollar’s climb and elevated yields.
Fed official Lorie Logan delivered a hawkish tone, with an FXS Speechtracker score of 9.2 out of 10, well above the historical average of 8.1. Her remarks called for at least 50 basis points more in rate hikes and several moves to reverse last autumn’s reductions, reinforcing a message that policy is not yet restrictive enough. The FXS Fed Sentiment Index rose to 136.59, firmly in hawkish territory, signalling expectations of a more aggressive policy path that supports the dollar and keeps upward pressure on yields.
Technical outlook remains bearish
On the daily chart, XAU/USD maintains a bearish near-term tone, trading below the Bollinger simple moving average middle band and the 100-day moving average. The Relative Strength Index (14) stands at 38.41, in bearish territory, suggesting lingering downside pressure rather than an immediate oversold rebound. Initial resistance is seen around $4,270, where the Bollinger middle band and the 100-day moving average at $4,275 form a tight cluster. A break above that area would be needed to shift the near-term outlook.
Key takeaways
- Gold held steady near $4,140 as higher US Treasury yields were offset by reduced Fed rate hike expectations after weak payrolls data.
- The 10-year yield hit its highest since April 2002 before retreating, while the 30-year yield touched levels not seen since late May 2002.
- Fed rate hike probability for October fell to about 22.7%, according to CME FedWatch, following softer labour data and downward revisions.
- Analysts caution that gold remains vulnerable to consolidation unless long-end yields and the dollar decline on a sustained basis.
Common questions
Why did gold not fall despite higher yields?
Gold held steady because the upward pressure from higher yields and a stronger dollar was counterbalanced by a drop in expectations for a Federal Reserve rate hike this month. The weaker-than-expected September payrolls report and downward revisions to prior months reduced the perceived likelihood of tightening, which supported gold as a non-yielding asset.
Gold’s ability to hold above $4,100 will depend on whether yields and the dollar continue to climb or whether softer economic data can pull long-term rates lower. For the latest price action, check the live gold price.