FX.co ★ XAU/USD, GOLD

Gold prices (XAU/USD) fell to around $4,120 per ounce during early European trading on Tuesday, remaining under pressure. A slight rise in US Treasury yields and a significant increase in global oil prices weighed on the non-yielding precious metal. Sovereign bond yields rose again as financial markets awaited upcoming third-quarter earnings reports from major US data center giants. While the benchmark 10-year US Treasury yield fell by about 0.35% during the day, to around 5.13% at the time of writing, it had risen by 1.2% earlier on Monday, reflecting the market's continued sensitivity to corporate capital spending expectations. Theoretically, higher yields on government-backed fixed-income instruments increase the opportunity cost of holding non-yielding gold. The third-quarter US corporate earnings season officially began, with MetaTrader leading the pack on Wednesday, becoming the first of the Big Five AI data center operators to report its quarterly results. Microsoft, Amazon, and Alphabet will follow suit next week. According to a Reuters report citing Goldman Sachs, Meta and its peers in the hyperscale data center sector are expected to increase their total capital expenditures to $1.2 trillion next year. This massive infrastructure investment could accelerate the issuance of US Treasury bonds, driving up yields and making growth stocks more attractive to institutional capital than traditional safe-haven assets. This contrasts sharply with recent weeks, when fixed-income yields faced significant downward pressure as market skeptics questioned the long-term financial sustainability of hyperscale data center companies' expansion. Deutsche Bank analysts noted that previous concerns about AI-related growth led to a significant risk aversion, which flooded the sovereign debt market and sent the yield on the benchmark 10-year US Treasury note sharply higher, falling 16.5 basis points to 5.07% from the previous week. Meanwhile, the energy market continues to face inflationary pressures, with West Texas Intermediate crude prices hovering around $98.45 a barrel, up 15% from their recent low of around $86.32. Market participants continue to factor in significant geopolitical risk premiums on energy commodity prices due to ongoing military conflicts in the Middle East. Worrying reports that Iran might extend its naval blockade from the Strait of Hormuz to the Bab el-Mandeb Strait and the Suez Canal, coupled with warnings from Mohsen Rezaei, secretary of Iran’s Supreme National Security Council, that Iran would take strong retaliatory measures against any potential attacks from the United States or Israel, have exacerbated concerns about a severe global energy shortage and reignited fears of inflation.

On the monetary policy front, the Federal Reserve officially entered its scheduled period of silence before the meeting, with central bank officials remaining silent. Previously, several policymakers reaffirmed their commitment to bringing inflation back to the 2.0% target, but notably, they did not mention the need for an immediate interest rate hike. Therefore, interest rate futures tracked by CME Group’s FedWatch program indicate that investors still widely believe the Federal Reserve will maintain its current benchmark interest rate at its upcoming October meeting and raise rates by 25 basis points in December. From a technical analysis perspective, the daily chart shows gold (XAU/USD) trading near $4,120, a clear short-term bearish bias. The spot price is firmly below the 20-day exponential moving average (EMA), currently at $4,186.57. The metal’s sharp decline from its recent highs and its inability to reclaim this key resistance level suggest that intraday rally attempts have been met with strong selling pressure. Momentum indicators also point to continued negative sentiment, with the 14-day Relative Strength Index (RSI) at 43.66, well below the 50 midline and still not in oversold territory. On the upside, the 20-day Exponential Moving Average (EMA) at $4,186.57 represents immediate technical resistance; to alleviate short-term downward pressure and pave the way for further gains toward the psychological level of $4,300, gold needs to close above this EMA. On the downside, the key psychological support level of $4,000 is expected to act as the last line of defense for the precious metal, preventing further selling pressure in the coming trading days.