Gold prices declined toward $4,120 during European trading on Tuesday as recovering US Treasury yields and rising oil prices weighed on the precious metal. Investors are also monitoring upcoming third-quarter earnings reports from major US technology companies, including Meta Platforms, amid growing concerns about AI-related capital spending and its implications for economic growth.
Gold Price Forecast: XAU/USD Faces Bearish Pressure
Spot gold (XAU/USD) traded near $4,120, maintaining a short-term bearish bias as prices remained below the 20-day Exponential Moving Average (EMA) at $4,186.57. The precious metal has retreated from recent highs and is struggling to regain this key technical level, suggesting that selling pressure continues to limit its recovery.
The Relative Strength Index (RSI) stood at 43.66, below the neutral 50 mark. This indicates that bearish momentum remains in place, although gold has not yet entered oversold territory.
On the upside, the 20-day EMA at $4,186.57 represents the nearest resistance. A daily close above this level would help ease downward pressure and potentially open the door for a more sustained recovery toward $4,300.
On the downside, the psychological $4,000 level remains a major support area for gold. A break below this threshold could expose the precious metal to further losses.
US Treasury Yields Recover Ahead of Meta Earnings
The US third-quarter earnings season is underway, with Meta Platforms among the major technology companies scheduled to report its results on Wednesday. Microsoft, Amazon, and Alphabet are expected to release their quarterly earnings next week.
According to Goldman Sachs, Meta is among five major AI hyperscalers expected to increase their combined capital expenditure to approximately $1.2 trillion next year, Reuters reported.
Such substantial investment could support economic growth and make growth-oriented assets more attractive to investors compared with traditional alternatives. However, concerns about the sustainability of AI infrastructure spending have recently weighed on market sentiment and influenced US Treasury yields.
Deutsche Bank analysts noted that growing concerns about AI-related economic growth had triggered a significant flight to safety in fixed-income markets. This shift helped support government bonds as investors reassessed the economic outlook.
The bank highlighted that the 10-year US Treasury yield fell 16.5 basis points last week, reaching 5.07% before edging up 1.5 basis points on Friday. The recent movements reflect changing investor expectations regarding economic growth and the outlook for financial markets.
Although Treasury yields showed signs of recovery on Monday, the 10-year yield was reported down 0.35% near 5.13% at the time of writing. Higher yields can weigh on gold because the precious metal does not offer interest income.
Oil Prices Rise on Middle East Risks
Oil prices have climbed nearly 15% over the past two weeks from a recent low of $86.32. West Texas Intermediate (WTI) crude was trading slightly higher near $98.45 at the time of writing.
Persistent tensions in the Middle East have prompted investors to maintain a substantial geopolitical risk premium in oil prices. Reports that Iran could expand the scope of a potential blockade to include the Bab el-Mandeb Strait and the Suez Canal have raised concerns about disruptions to global energy supplies.
Additional concerns emerged after Mohsen Rezaei, a member of Iran's political and security establishment, warned over the weekend that Tehran had prepared new retaliatory plans in the event of further US-Israeli attacks.
Higher oil prices could complicate the inflation outlook by increasing energy costs. This could also influence Federal Reserve policy expectations and indirectly affect gold prices through changes in Treasury yields and the US dollar.
Federal Reserve Enters Blackout Period
The Federal Reserve has entered its blackout period ahead of its upcoming monetary policy announcement. During this period, Fed officials generally refrain from public comments on monetary policy.
Recent remarks from several policymakers have emphasized the importance of bringing inflation back to the central bank's 2% target. However, officials have not indicated an urgent need for another interest rate increase.
Meanwhile, the CME FedWatch Tool suggests that market participants expect the Fed to leave interest rates unchanged in October, while pricing in the possibility of a rate hike in December.
The combination of Treasury yield movements, oil price volatility, geopolitical tensions, and changing Fed expectations is likely to remain central to gold's near-term direction.
For now, XAU/USD faces a bearish technical outlook while trading below $4,186.57. A sustained break above this resistance could support a recovery toward $4,300, whereas the $4,000 psychological level remains the key downside support to watch.