On Tuesday, gold first fell then rose, mainly driven by lower US Treasury yields and a pullback of the US Dollar Index from highs. Intense battles between bulls and bears unfolded during the session, resulting in a short-term corrective rebound. Spot gold finally closed at $4163.74 per ounce, up 0.5%. Gold failed to sustain its rebound momentum on Wednesday and retreated under pressure again. News of renewed tensions in the Middle East pushed Brent crude oil back above $100 per barrel, lending support to the US dollar and returning the market to an overall bearish trend. Investors are closely watching the release of the Fed’s meeting minutes from last month. Although market expectations for another rate hike in October have cooled, the specter of a December rate hike still lingers, and at least one more rate hike is anticipated in early 2027. Before press time, spot gold dipped to $4115.95 per ounce, and the support level at $4100.00 per ounce may be tested once again.

US macroeconomic data released last week showed slowing inflation and a mild cooling in the labor market, eASIng pressure on the Fed to raise interest rates in the short term. However, the CME FedWatch Tool indicates markets price in an approximately 86.4% probability that the Fed will raise borrowing costs in December. Therefore, the upcoming FOMC meeting minutes will serve as a key source of market insight into future rate hikes and policy metrics, which will in turn exert a significant impact on the US dollar and non-interest-bearing gold. Meanwhile, the nominal yield on the 10-year US Treasury rose to 5.35%, hitting its highest level since 2002. The rise in real yields largely reflects widening term premiums, concerns over Treasury supply and the repricing of required returns on US government debt, exerting more peRSIstent pressure on non-yielding gold compared with mere rate hike expectations.

Mary Daly, President of the Federal Reserve Bank of San Francisco, stated on Tuesday that she supported the September rate hike given rising inflation risks. Yet she argued whether further rate hikes will be needed largely depends on whether the inflationary shocks will gradually fade or continue to compound. Her remarks suggest she is open to pausing rate hikes if geopolitical tensions improve in the coming weeks or months. Daly reaffirmed her backing for the Fed’s rate increase decision, but in line with the usual practice of other senior Fed officials, she did not elaborate much on whether she advocates further action. Daly does not hold voting rights on interest rate decisions this year, though she participates in the Fed’s regular policy discussions held in Washington.

Short-term gold market outlook: Spot gold faces resistance at $4350.00 per ounce, with downside support seen at $4100.00 per ounce.

Spot Gold Daily Chart

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