Gold price (XAU/USD) moved higher during the early Asian session on Friday, recovering to near $4,180 as US Treasury bond yields retreated from levels not seen in decades. The 10-year yield, a benchmark for global borrowing costs, eased to 5.24% after touching a fresh multi-decade high of 5.34% earlier in the session. Similarly, the 30-year bond yield moderated after hovering near 24-year peaks.
The rebound in the precious metal came as softer yields reduced the opportunity cost of holding non‑interest‑bearing assets. However, the upside may be capped by persistent inflation worries linked to elevated energy costs and the prospect of further interest rate increases from the Federal Reserve.
Market focus on US jobs data
All eyes are on the US September employment report due later on Friday. Economists expect nonfarm payrolls to show an increase of 90,000 jobs, down from 162,000 in the prior month, while the unemployment rate is projected to remain unchanged at 4.1%. The data could offer fresh hints about the trajectory of US interest rates and the timing of any further Fed tightening.
According to the CME FedWatch Tool, markets currently price in nearly a 24.9% chance of a rate hike at the Fed's October meeting and a 79.4% probability of an increase by December. Any sign of labour market strength could reinforce those expectations and weigh on gold. David Meger, director of metals trading at High Ridge Futures, noted that anything increasing the likelihood of a Fed rate hike would dent sentiment in the gold market. He also pointed to further risks from a strong rise in energy prices or an escalation in the Middle East.
Geopolitical and inflation backdrop
Geopolitical uncertainty continues to provide a safe‑haven underpinning for gold. “Geopolitical uncertainty, particularly around the stalled US‑Iran ceasefire discussions, continues to provide a safe‑haven underpinning, while higher oil prices remain an inflation risk,” said Manav Modi, commodity analyst at Motilal Oswal Financial Services Ltd. The combination of geopolitical tensions and elevated energy costs keeps inflation concerns alive, which could limit the scope for a sustained gold rally.
On the macro side, analysts at UOB Group noted that US headline PCE rose 0.3% month‑on‑month in August, in line with estimates, while the year‑on‑year rate fell to 3.4% from 3.7%. Although recent BEA methodology revisions improved the optics, UOB said they did not materially alter the underlying inflation narrative.
Technical outlook remains bearish
From a technical perspective, XAU/USD maintains a bearish near‑term bias. Price continues to trade below the 100‑day moving average (MA) and the 20‑day simple moving average (SMA) of the Bollinger Bands – both located around $4,285 and $4,300 respectively. The 14‑day Relative Strength Index (RSI) stands near 40.83, in neutral‑to‑soft territory, suggesting subdued bullish momentum and leaving the downside exposed while overhead resistance caps recovery attempts.
UOB Group analysts said that gold reversed earlier gains that saw it trade as high as $4,219/oz to close 0.6% lower at $4,157/oz, as elevated real yields continued to cap the upside. On the topside, initial resistance lies at the 100‑day MA at $4,285, followed by the 20‑day SMA at $4,300, with a stronger barrier at the upper Bollinger band near $4,470. On the downside, immediate support sits at the lower Bollinger band around $4,130; a sustained break below that level would reinforce the bearish bias and open the door for deeper losses, while a daily close back above the clustered moving averages would be needed to ease current downside pressure.
Key takeaways
- Gold recovered to near $4,180 on Friday as US Treasury yields retreated from multi‑decade highs.
- The upside remains limited by inflation concerns and expectations of further Fed rate hikes.
- Markets await the US September nonfarm payrolls report for clues on the interest rate path.
- Technically, gold holds a bearish bias below the 100‑day MA and 20‑day SMA; support lies at $4,130 and resistance at $4,285.
Common questions
Why does gold react to US Treasury yields?
Gold is a non‑interest‑bearing asset, so rising bond yields increase the opportunity cost of holding it. Conversely, when yields fall, gold becomes more attractive relative to yielding assets. This inverse relationship is a key driver of short‑term price moves.
How could the US jobs report affect gold?
Stronger‑than‑expected employment data could reinforce expectations of further Fed rate hikes, which would typically pressure gold higher. A weaker reading might ease those expectations and support gold. The market is pricing in a high probability of a rate move by December, so any surprise in the data could shift those odds.
For the latest moves, check the live gold price.
In summary, gold’s rebound this morning reflects a temporary pullback in US yields, but the broader environment of elevated inflation, tight labour markets, and geopolitical risks means the path ahead remains uncertain. The nonfarm payrolls report later today will be the next major catalyst for direction.