FX.co ★ XAU/USD, GOLD

Gold prices (XAU/USD) edged lower on Tuesday, declining by more than 0.43% to around $4,122 per ounce. Despite lower US Treasury yields and a generally weaker dollar, gold prices continued their downward trend as market participants largely ignored domestic economic data ahead of next week's key Federal Reserve monetary policy meeting. The upward momentum has stalled, and gold prices are likely to remain volatile after Fed officials indicated last week that they are in no hurry to raise interest rates at the October meeting. Interest rate futures tracked by Prime Terminal show the market currently pricing in only a 14% probability of an October rate hike, while expectations for a 25-basis-point increase in December remain strong, at around 90%. With the Fed officially entering its pre-meeting blackout period—which ends with Chairman Kevin Warsh's press conference on October 28—market attention is temporarily shifting to upcoming housing market indicators. Recent data shows that rising mortgage rates, driven by higher US Treasury yields, have severely impacted the housing market, causing existing home sales in the US to fall by 7.3% in September. Looking ahead to the remainder of the week, investors are closely watching upcoming economic data, including initial jobless claims, which are expected to rise slightly to 200,000 from 199,000; the S&P 500 Preliminary Global Purchasing Managers’ Index (PMI), a key indicator of business confidence; and the final reading of the University of Michigan Consumer Sentiment Index for October. Meanwhile, officials from several major central banks continue to hint at further monetary tightening, posing significant macroeconomic challenges for gold. Gold has historically performed well in low interest rate environments due to the low opportunity cost of holding non-yielding assets. Bank of Japan Governor Kazuo Ueda recently acknowledged that core inflation is “very close” to the central bank’s 2.0% target and strongly suggested the possibility of future interest rate hikes. Meanwhile, Megan Green, the Bank of England’s chief monetary policy officer, warned that the risk of a second round of inflationary feedback loops is much higher than previously anticipated and stressed that the UK’s current monetary policy stance remains insufficient in terms of tightening. These hawkish signals from global monetary policy reinforce the prevailing narrative that “high interest rates will persist for longer” in the international debt market.

From a technical analysis perspective, spot gold continues to trade sideways within the $4,100-$4,200 range, extending its decline for several consecutive trading days and showing initial signs of stabilization near the lower end of the range. However, uncertainty surrounding the Federal Reserve’s interest rate hike expectations in December continues to exert downward pressure on gold prices. Momentum indicators remain bearish; although the 14-day Relative Strength Index (RSI) has dipped slightly as prices approach key structural support levels, it still maintains a downward bias. To confirm the continuation of the downtrend, sellers must successfully break and hold the psychological support level of $4,100. Once this support is broken, the immediate downside target is the October 14 low of $4,073, followed by the session low of $3,996 near July 29. If selling pressure persists, the price could reach deeper historical support levels, such as the July 17 low of $3,959 and the year-to-date low of $3,941. Conversely, for a strong bullish reversal, buyers of the gold/US dollar pair must break the initial resistance level at $4,200, followed by the 100-day simple moving average (SMA), currently at $4,235. A sustained break above these barriers would open the way towards the 50-day SMA at $4,321, paving the way for a stronger recovery with the goal of reaching the key $4,500 threshold.