Gold rallied then pulled back on Wednesday. After rebounding from the one-week low of $4341.06 per ounce, spot gold once climbed to a high of $4434.15 per ounce. However, gains narrowed markedly as the US dollar strengthened and US Treasury yields rose again. At press time, spot gold was trading near $4395.
(Source: FX168)
The US Dollar Index (DXY) rebounded from the August 21 low of 98.60 to near 98.86. Meanwhile, US Treasury yields climbed across the board. The 10-year US Treasury yield rose to roughly 4.85%, hitting its highest level since November 2023.
The US Treasury Department announced on Wednesday it would repurchase up to $6 billion in long-dated Treasuries on September 10, exceeding the prior guidance of at least $4 billion per operation. Nevertheless, the Treasury market did not strengthen notably on the news; yields kept rising and further lifted the holding cost of non-interest-bearing gold.
High Oil Prices Reinforce Rate Hike Expectations
Gold also faced indirect pressure from climbing energy prices.
The US and Iran have exchanged military strikes recently. The US military said it destroyed five Iranian crude oil tankers, while Iran announced counterattacks against US warships, oil tankers and US military bases in Jordan. Escalating tensions in the Middle East kept WTI crude near $94 per ounce, the highest level since early June, with a weekly gain of more than 5%.
Markets worry high energy costs may slow inflation cooling and force the Federal Reserve to re-tighten policy.
CME FedWatch shows traders currently price in around a 60% probability of a 25-bASIs-point Fed rate hike next week. US August PPI data will be released on Thursday, followed by CPI on Friday. The two figures are likely the most important policy variables ahead of the Fed’s September 15-16 meeting.
If inflation comes in hotter than expected, bets on Fed rate hikes may strengthen further, pushing yields higher and weighing on gold.
TD Securities: Hawkish Fed May Only Delay Next Gold Rally
That said, TD Securities believes this week’s US inflation prints may dictate gold’s short-term direction but will not alter the medium-to-long-term structural support for precious metals.
The bank argues higher-than-expected inflation may boost rate hike pricing and drag gold down temporarily. Conversely, a notable eASIng in inflation pressure could trigger fresh capital to build long gold positions.
TD Securities also notes the long-term bullish thesis from falling US dollar purchASIng power, peRSIstent central bank gold buying and renewed inflows into gold ETFs continues to back the precious metals market. Therefore, a more hawkish Fed may only delay gold’s next rally instead of sparking a sustained deep decline.
$4356 Acts as Key Short-Term Support
Technically, on the 4-hour chart, gold remains above the 200-period simple moving average (SMA) at $4356, showing dip-buying has not fully vanished.
However, the 50-period SMA at $4415 forms the first overhead resistance, and the 100-period SMA at $4489 marks the next major barrier. If gold breaks above these levels, upside targets may extend to $4550 and then $4700.
On the downside, $4356 is the first level to watch. A decisive break below this level could intensify selling pressure and open room for a drop toward the $4200 zone.
Gold is currently caught in a clear tug-of-war. Central bank purchases, ETF inflows and geopolitical risks provide downside support, while high oil prices, elevated yields and Fed hike expectations cap upside. Thursday’s PPI and Friday’s CPI will likely serve as the next critical catalyst to break this balance.