On Tuesday, after gold plunged nearly 4% in the previous session, spot gold staged a low-level recovery. The rebound was mainly driven by dovish remarks from Fed officials and weak economic data, which temporarily cooled market expectations of another Fed rate hike in October. US Treasury yields retreated, eASIng selling pressure on gold. Spot gold rebounded to $4184.95 per ounce intraday and closed at $4182.12 per ounce, up 1.6%. Gold briefly climbed above $4202.00 per ounce on Wednesday. However, as markets expect the Fed to raise interest rates at least once before the end of the year, gold bulls remained on the sidelines. On the final trading day of the third quarter, the US dollar edged lower, yet market volatility may intensify in the latter half of the session. Gold is now at a critical watershed for bulls and bears. Market focus will be on US ADP employment data, PCE inflation and Friday’s non-farm payrolls report, which will directly price whether the Fed will deliver another rate hike in October. At press time, spot gold traded near $4187.20 per ounce, maintaining range-bound trading before data releases.

US data released on Tuesday showed that August JOLTs job openings fell to 7.07 million from 7.33 million in July, below the market forecast of 7.23 million. Meanwhile, the Conference Board reported that the September Consumer Confidence Index dropped to 81.9 from 88.6 in August, missing expectations and hitting the lowest level since 2014. The Expectations Index, which reflects consumers’ views on income, business and labor market conditions, fell by 5.9 to 63.6. The weak data triggered subsequent profit-taking in the US dollar and offered support to gold. Even so, the CME FedWatch Tool shows markets still price a greater than 90% chance of another Fed rate hike before year-end. In addition, peRSIstent geopolitical uncertainty stemming from US-Iran tensions may continue to underpin the US dollar as a safe-haven asset.

Divergent remarks from Fed officials marked a turning point. New York Fed President Williams stated clearly on Tuesday that there is no need for hasty action after the September rate hike. If the economy evolves as expected, only one more rate hike this year will be sufficient to bring inflation back to the 2% target. His comments immediately shifted market expectations. According to the latest CME FedWatch Tool, the probability of an October rate hike tumbled to 42.6% from 70.9% one week ago. Markets broadly scaled back bets on near-term tightening and now expect the final rate hike of the year to arrive in December. At the same time, Governor Barr still emphASIzed that further rate hikes may be needed, while Musalem argued that policy remains accommodative after rate increases. The mixed hawkish and dovish rhetoric opened a window for gold’s rebound but also capped its upside potential.

Short-term gold outlook: resistance for spot gold stands at $4350.00 per ounce, with support at $4100.00 per ounce.

Spot Gold Daily Chart

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