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Gold Tests $4,100 as US Dollar and Yields Rise Ahead of FOMC Minutes
Developing
In Short: Gold prices are testing $4,100 as the US Dollar and Treasury yields rise, with traders awaiting FOMC meeting minutes.
Gold prices are testing $4,100 as the US Dollar and Treasury yields rise, with traders awaiting the release of the Federal Open Market Committee (FOMC) meeting minutes for further guidance on interest rates.
The US Dollar Index (DXY) is trading around 102.30, near levels last seen in April 2025, while the benchmark 10-year US Treasury yield has climbed to 5.365%, its highest since 2002, before easing to 5.31%.
Central banks remained net buyers in August, adding 39 tonnes to their reserves, bringing year-to-date purchases to 170 tonnes, according to FXStreet.
Poland and Uzbekistan each added 8 tonnes to their reserves, contributing to the 1,136 tonnes of Gold worth around $70 billion added to reserves in 2022, as per data from the World Gold Council.
Higher Treasury yields raise the opportunity cost of holding non-yielding assets like Gold, while a stronger US Dollar makes the precious metal more expensive for buyers using other currencies.
Traders will closely examine the FOMC meeting minutes for fresh guidance on the likelihood of additional tightening, with markets widely expecting the US central bank to leave interest rates unchanged at its October 27-28 meeting.
Fresh data from the New York Fed showed that one-year inflation expectations rose to 3.9% in September from 3.6%, their highest level since May 2023.
The three-year measure edged up to 3.3%, while the five-year outlook remained steady at 3.0%.
Against this backdrop, the GBP/USD pair weakened further below mid-1.3200s during the first half of the European session on Wednesday, eroding a major part of the previous day's move higher amid a broadly firmer US Dollar.
Traders expect a chance for GBP to retest 1.3285, with support at 1.3240 and 1.3220.
Spot prices remain confined in a familiar range held over the past two weeks as traders await the release of FOMC Minutes before placing fresh directional bets.
The FOMC Minutes will be scrutinized closely for more cues about the Fed's policy path.
Background
While the Moving Average Convergence Divergence (MACD) remains in positive territory with a reading of 3.35, hinting at modest bullish momentum, the Relative Strength Index (RSI) at 44.26 leans slightly lower, suggesting that rallies are vulnerable.
Oil prices above USD 100 a barrel and Treasury yields near 5% are squeezing broader risk appetite, according to traders. The situation in Saudi Arabia, where oil supplies are at risk due to recent attacks, is also adding to the volatility.
What's still developing
- A hawkish Fed outlook has weighed heavily on Gold since the Middle East conflict erupted in late February, leaving the metal more than 25% below January’s all-time high near $5,600.