Gold opened the week in negative territory, dropping 0.85% on Monday and touching a one-month low of $4,253 before recovering to trade near $4,310. The move lower came as the 10-year US Treasury yield breached the 5% mark for the first time since 2023 and the US Dollar firmed against major currencies, both headwinds for the non-yielding precious metal.
This week’s spotlight falls on the Federal Open Market Committee (FOMC), which delivers its monetary policy decision on Wednesday. According to data from Prime Terminal, markets have priced in a 93% chance of a quarter-point rate hike. A tighter policy outlook tends to weigh on gold because it raises the opportunity cost of holding a zero-yield asset.
Energy prices fuel yield spike
The jump in Treasury yields was largely driven by a renewed surge in energy costs. Houthi attacks on Saudi Arabia’s East-West pipeline triggered a preventive shutdown that cut oil production by roughly 7 million barrels per day, according to reports. West Texas Intermediate (WTI), the US crude benchmark, rallied above the $100 mark and was up more than 1.50% on Monday. The oil price shock stoked speculation that inflation could accelerate, following last week’s stronger-than-expected US Producer Price Index (PPI) and Consumer Price Index (CPI) readings.
The US Dollar Index (DXY), which tracks the greenback against six major peers, rose 0.32% to 99.41, adding further pressure on gold. A stronger dollar makes dollar-denominated bullion more expensive for holders of other currencies.
A busy week for central banks
Beyond the Fed, two other major central banks are meeting this week. The Bank of England is expected to hold its Bank Rate at 3.75%, though a repeat of the 6-3 vote split cannot be ruled out. On Friday, the Bank of Japan is forecast to raise rates by 25 basis points to 1.25%. Higher yields in the UK and Japan add to the global shift toward tighter monetary conditions, which typically dampens gold’s appeal.
Although gold has historically been seen as an inflation hedge, rising bond yields and a stronger dollar have traditionally offset that attribute. The current environment pits the metal against both forces simultaneously.
Technical picture: mixed signals
From a technical perspective, gold printed a hammer candlestick pattern after testing the 50-day Simple Moving Average (SMA) at $4,271 and reclaiming the $4,300 level. If Monday’s session closes above the 100-day SMA at $4,351, the near-term bias could shift to the upside. Resistance beyond that lies at the psychological $4,400 level, followed by $4,450 and $4,500, then the 200-day SMA at $4,539.
On the downside, support starts at $4,300 (the round figure), then September’s second low near $4,282, and the 50-day SMA at $4,271. The Relative Strength Index (RSI) remains in bearish territory, suggesting that further weakness is possible. The divergence between the RSI and price action may lead to a period of consolidation in the days ahead.
For a real-time view of the spot market, check the live gold price.
Key takeaways
- Gold fell 0.85% on Monday, hitting a one-month low of $4,253, as the 10-year US Treasury yield rose above 5% for the first time since 2023.
- The US Dollar Index gained 0.32%, adding pressure on the dollar-denominated metal.
- Markets see a 93% probability of a quarter-point rate hike by the Federal Reserve at this week’s FOMC meeting.
- Technical levels to watch: resistance at $4,400 and the 200-day SMA at $4,539; support at $4,300 and the 50-day SMA at $4,271.
Common questions
Why did gold fall even though oil prices rose?
While rising oil prices can stoke inflation fears, which sometimes support gold as an inflation hedge, the immediate impact of the oil shock pushed US Treasury yields sharply higher and strengthened the US Dollar. Both factors are negative for gold in the short term, as higher yields increase the opportunity cost of holding the metal and a stronger dollar makes it more expensive for international buyers.
What is the 50-day Simple Moving Average and why does it matter?
The 50-day SMA is a widely watched technical indicator that smooths out price fluctuations over the past 50 trading days. It acts as a dynamic support or resistance level. Gold tested this level at $4,271 on Monday before bouncing, highlighting its importance as a near-term floor.
How do other central bank decisions affect gold?
When major central banks like the Bank of England or the Bank of Japan raise or signal higher rates, global bond yields tend to rise. This increases the opportunity cost of holding gold relative to interest-bearing assets, which can weigh on the metal’s price even if the Fed itself does not move in a particular direction.
Investors will closely watch the Fed’s statement and projections on Wednesday for clues about the pace of future tightening. Until then, gold is likely to remain sensitive to yield and currency moves.