FX.co ★ XAU/USD, GOLD

Gold (XAU/USD) fell on Friday, reversing earlier gains and failing to benefit from a slight decline in the dollar. Growing expectations of an interest rate hike by the Federal Reserve continued to weigh on the non-yielding precious metal. After dropping to a one-week low near $4,244 on Thursday, spot gold eventually settled around $4,280, virtually unchanged, and was on track for a lower close. This continued downward pressure stems directly from the Fed's tightening monetary policy. Last week's 25-basis-point rate hike, which brought the federal funds rate to a range of 3.75% to 4.00%, reinforced this expectation. Furthermore, the latest economic projections show that 16 of the 18 Fed policymakers anticipate at least one rate hike before the end of the year. This week, strong US Purchasing Managers’ Index (PMI) data and hawkish comments from top Federal Reserve officials, including New York Fed President John Williams and Richmond Fed President Tom Barkin, have bolstered market expectations for another interest rate hike as early as next month. Williams stressed the need to bring inflation back to the Fed’s target level in due course, while Barkin indicated that inflationary pressures far outweigh temporary shocks from energy and tariffs. As a result, the CME FedWatch tool currently shows a roughly 71% probability of a Fed rate hike at the Federal Open Market Committee (FOMC) meeting scheduled for October. This has led to a sharp rise in US Treasury yields and pushed the US Dollar Index (DXY) to near a two-month high of 101.40 on Thursday, before settling around 101. The rising dollar significantly increases the cost of gold for investors holding foreign currencies, while the yield on the benchmark 10-year U.S. Treasury note has settled at around 5.21%, its highest level since 2007, greatly increasing the opportunity cost of holding non-yielding gold. Meanwhile, ongoing geopolitical tensions in the Middle East have pushed oil prices higher, and stalled diplomatic efforts regarding the Strait of Hormuz are further complicating the Federal Reserve's efforts to combat inflation. Domestically, the final reading of the University of Michigan's consumer sentiment index rose slightly to 48.1 in September, but consumers' inflation expectations remained robust, with one-year inflation expectations holding steady at 4.6% and five- to ten-year inflation expectations at 3.4%, highlighting deep price pressures. A series of key data releases are due next week, including personal consumption expenditures (PCE) inflation figures, the Institute for Supply Management's manufacturing PMI, and non-farm payrolls.

Technically, the pair is showing a clear short-term bearish trend on the daily chart, with the price consistently trading below key moving averages, including the 50-, 100-, and 200-day simple moving averages, indicating seller dominance. Momentum indicators further reinforce this cautious outlook. The Relative Strength Index (RSI) is holding steady at 44, while the Moving Average Convergence Divergence (MACD) remains well below the zero line, suggesting that any rebound attempt will likely face strong selling pressure near the upper supply zone. Current technical resistance is centered around the 100-day moving average at $4,304, followed by the 50-day moving average at $4,317. A decisive and sustained break above these resistance levels is needed to alleviate the current bearish momentum and subsequently test the 200-day moving average around $4,541 and the horizontal resistance level around $4,700. Current structural support lies in the $4150 area, with the potential for a further decline around $4000, where buyers may enter if the pullback continues.