On Wednesday, gold opened flat and then moved lower, suffering heavy selling and a sharp decline. September S&P Global US Manufacturing and Services PMI both beat market expectations, showing resilient economic activity, stoking worries about sticky inflation and raising the odds of another Fed rate hike this year. Spot gold retreated from an intraday high of $4369.00 per ounce to a low of $4275.05 per ounce, closing at $4287.18 per ounce with a 1.6% loss. Early Thursday, spot gold briefly rebounded to $4302.99 per ounce before turning weak again. Market expectations for Fed rate hikes and elevated US Treasury yields may continue to support the US dollar and deepen gold’s decline. During European trading hours, spot gold touched $4244.21 per ounce, a one-week low. It edged back slightly to around $4264.65 per ounce at press time. Price action shows gold is struggling to build upward momentum and is expected to consolidate below $4300.00 per ounce.

Fed Governor Barr stated on Wednesday at a housing affordability conference hosted by the Chicago Fed that the Fed took an important step last week to recalibrate short-term borrowing costs to lower inflation, and further rate hikes will likely be needed. He pointed out that risks to hitting the inflation target have risen while risks to the labor market have eased. US economic growth is solid and the labor market remains robust, yet inflation stays above the Fed’s 2% target without clear signs of cooling. Barr said his baseline view is that additional policy adjustments may be required to ensure inflation returns to target in a timely manner. Separately, New York Fed President Williams spoke at the London Macro Policy Forum on Thursday, saying the era of explicit forward guidance has ended, echoing Fed Chair Walsh’s stance, and stating that another rate hike this year would be “reasonable”.

With no visible progress in US-Iran diplomatic talks, markets are eyeing uncertainty over a potential US diesel export ban, and oil prices rose more than 2% on Thursday. Earlier, Iran’s president told the UN General Assembly that Tehran would never yield to US pressure. Nevertheless, a senior Iranian official later publicly stated that diplomatic efforts must continue despite remaining disagreements between Iran and the US on how to end the conflict. On the other hand, a sell-off in US Treasuries has weakened global bond markets and pushed yields higher across the curve, lifting the US dollar. Coupled with strong US PMI data, this has reinforced the Fed’s hawkish stance. In addition, rising Brent crude prices and the possible US diesel export ban have heightened inflation risks, indirectly supporting the US dollar and weighing heavily on gold.

Short-term gold market outlook: Resistance for spot gold stands at $4450.00 per ounce, while downside support is seen at $4200.00 per ounce.

Spot Gold Daily Chart

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