Gold climbed back above $4,300 on Wednesday, steadying after a loss of nearly 2.7% in the previous session. A modest pullback in US Treasury yields helped the metal recover, although the rebound has been cautious: XAU/USD was trading around $4,334 at the time of writing, up from an intraday low of $4,282, its weakest level since August 7. The move comes as traders weigh firmer Fed rate expectations against softer labour data.
Treasury yields ease but stay near highs
The main support for gold on Wednesday came from a slight easing in government bond yields across the US curve. The benchmark 10-year Treasury yield was trading near 4.78%, after briefly touching 4.81%, its highest level since October 2023. Even with that pullback, yields remain close to multi-year highs.
The earlier bond sell-off was linked to rising oil prices after the resumption of hostilities in the Middle East. Higher energy costs feed into inflation expectations and push bond yields up, reducing the appeal of an asset that pays no interest. Gold is traditionally seen as a hedge against inflation and geopolitical risk, but those supports have been overshadowed by the move in yields and the prospect of higher rates.
Fed rate-hike bets and a firmer dollar
Expectations of tighter Federal Reserve policy are doing much of the work behind gold's recent weakness. According to the CME FedWatch tool, markets price in roughly a 70% chance of a rate hike at the Fed's September 15-16 meeting, up from 36% a week earlier. The shift followed a tougher tone on inflation from Fed Chair Kevin Warsh at the Jackson Hole Symposium.
The US dollar has firmed alongside those expectations, adding another headwind for dollar-denominated gold. The US Dollar Index traded around 99.77 after reaching 99.86, its highest level since August 14. Escalating US-Iran tensions have supported the greenback, although weak labour data has limited its advance: the ADP Employment Change report showed private-sector payrolls rose by 38,000 in August, below the 47,000 forecast and the previous reading of 46,000.
Technical picture: support and resistance
The near-term bias for gold remains tilted lower. The metal trades below its 100-day simple moving average near $4,360 and the Bollinger Bands midline around $4,445. Momentum gauges reinforce the capped tone: the daily Relative Strength Index sits at 45, just underneath the neutral 50 mark, while the MACD histogram is in negative territory.
On the downside, immediate support is visible at the lower Bollinger Band near $4,204, ahead of a more substantial horizontal floor at $4,000. On the topside, initial resistance stands at the 100-day SMA around $4,360, followed by the Bollinger Bands midline near $4,446, with the upper band around $4,688 acting as a more distant cap.
Key takeaways
- Gold traded near $4,334 on Wednesday after falling nearly 2.7% the day before, supported by a modest pullback in Treasury yields.
- Markets price in around a 70% chance of a Federal Reserve rate hike at the September 15-16 meeting, up from 36% a week earlier.
- The 10-year Treasury yield remains close to 4.78%, near levels not seen since October 2023.
- Attention is turning to Friday's Nonfarm Payrolls report, which could reshape Fed policy expectations and drive gold's next move.
Common questions
Why is gold under pressure despite inflation and geopolitical tensions?
Gold is often bought as a hedge against inflation and geopolitical risk, but those supports can be outweighed when bond yields rise. Higher Treasury yields raise the opportunity cost of holding an asset that pays no interest, and expectations of Federal Reserve rate hikes have a similar effect.
What are Nonfarm Payrolls and why do they matter for gold?
Nonfarm Payrolls is the US monthly report on jobs created outside the farming sector. Because it is one of the most closely watched labour market indicators, a stronger or weaker reading can change expectations for Fed policy, which in turn affects the US dollar, Treasury yields and gold.
What does it mean that gold is below its 100-day moving average?
The 100-day simple moving average is the average closing price over the past 100 sessions, and trading below it is generally seen as a bearish signal. Gold currently sits under the 100-day SMA near $4,360 as well as the Bollinger Bands midline, pointing to a downward bias in the near term.
Sellers may hold back from aggressive positioning ahead of Friday's Nonfarm Payrolls report, which could quickly change the outlook for Fed policy. Until then, gold is likely to remain sensitive to Treasury yields, the dollar and oil prices. Readers who want to track the action as it happens can follow the live gold price.