Gold holds steady below $4,150 amid elevated US yields

• Gold price flatlines around $4,140 in Tuesday’s early Asian session.
• US Treasuries came under renewed pressure, pushing longer-dated yields to fresh multi-decade peaks.
• Traders are now pricing in a nearly 22.7% likelihood that the Fed will hike rates at its next meeting.

Gold price (XAU/USD) trades on a flat note near $4,140 during the early Asian session on Tuesday. Pressure from a stronger US Dollar (USD) and elevated US Treasury yields was offset by reduced expectations of a Federal Reserve (Fed) rate hike this month.

The benchmark 10-year Treasury yield climbed about 7 basis points (bps) to 5.349%, its highest level since April 3, 2002, before retreating to 5.30%. The yield on the 30-year Treasury bond also rose about 3 bps to 5.661%. Earlier, it was up more than 7 bps to 5.703%, a level not seen since late May 2002. Higher rates typically reduce the appeal of the precious metal relative to yield-bearing assets like Treasuries.

"We could see a near-term drop (in gold prices) before the buyers step in a meaningful way, and it's all to do with the fact that the dollar has been climbing higher and yields are elevated," said Fawad Razaqzada, a market analyst at forex.com.

Expectations that the Fed will tighten its policy this month eased after US Nonfarm Payrolls (NFP) came in weaker-than-expected in September, and the ‌NFP figures for the prior two months were revised lower, data showed on Friday.

Interest-rate swaps showed traders pricing in an almost 22.7% chance that the US central bank lifts benchmark borrowing costs at its October gathering, according to the CME FedWatch tool.

Traders await the minutes of the September Federal Open Market Committee (FOMC) meeting, which is due on Wednesday. This report could help determine the central bank's future monetary policy after it raised interest rates last month for the first time in three years.

Gold recovery still hinges on a sustained turn lower in yields

Analysts at OCBC argue that gold remains constrained by the broader rates backdrop, noting that it is "still waiting for yields to turn." They highlight that gold’s brief "post-US payrolls rebound faded quickly despite a softer US labour report and a further pullback in October Fed hike expectations." The key drag, in their view, is that "long-end yields did not fall sustainably and the USD stayed firm, limiting follow-through in gold."

This dynamic "reinforces the view that lower Fed hike risk alone may not be enough to drive the next leg higher." OCBC stresses that "the more important catalyst is whether softer US data can pull long-end and real yields lower on a more sustained basis." At the same time, they caution that "elevated oil prices remain a complication by keeping inflation and term premium concerns alive."

Against this backdrop, OCBC warns that "near term, gold may remain vulnerable to consolidation if yields stay high," with any "clearer decline in yields and the USD" seen as providing "a firmer basis for recovery."

Logan’s hawkish tilt lifts Fed expectations and supports the Dollar

Fed’s Logan delivers a distinctly more hawkish tone, with a 9.2/10 FXS Speechtracker score standing well above the 8.1/10 historical average, underscoring a stronger inclination toward further tightening. The emphasis that higher yields may reflect increased term premiums, potentially reducing the need for additional tightening, sits in tension with explicit calls for at least 50 bps more in rate hikes and several moves to reverse last fall’s reductions, reinforcing a message that policy is not yet restrictive enough and that inflation will not reach 2% without higher rates. This combination of acknowledging term-premium effects while insisting on more hikes points to a Fed stance that is firmly supportive of the Dollar and keeps upward pressure on US yields.

The FXS Fed Sentiment Index rises by 1.68 points to 136.59, confirming a clear move deeper into hawkish territory well above the neutral 100 threshold. This jump, aligned with the elevated FXS Speechtracker score, signals that market participants should expect a more aggressive policy path, with implications for stronger Dollar demand and continued sensitivity of risk assets to Fed rate expectations.

Technical Analysis: Gold remains capped under the 100-day SMA

In the daily chart, XAU/USD keeps a bearish near-term tone as spot holds beneath the Bollinger simple moving average middle band and the 100-day moving average. Price has slipped away from the recent upper Bollinger band ceiling, while the Relative Strength Index (14) at 38.41 stays in bearish territory, hinting at lingering downside pressure rather than an immediate oversold rebound.

On the topside, initial resistance appears in the $4,270 area, where the Bollinger middle band and the 100-day moving average at $4,275 form a tight capping cluster, ahead of a stronger barrier at the upper Bollinger band around $4,445. On the downside, the lower Bollinger band at $4,100 offers the first line of support, and a sustained break below this boundary would likely open the way to a deeper corrective phase in the coming sessions.

(The technical analysis of this story was written with the help of an AI tool. Know more.)