Gold prices staged a strong recovery from weekly lows, climbing back above the $4,150 level during early trading on Thursday. The US Dollar (USD) and US Treasury yields retreated further from their post-CPI highs following reports of Chinese bond purchases. However, the bearish daily Relative Strength Index (RSI) continues to pose a challenge for bullish momentum.
XAU/USD Technical Analysis
XAU/USD has traded within a $4,100–$4,200 range since the beginning of October, while remaining below the 50-day, 100-day, and 200-day Simple Moving Averages (SMAs) on the daily chart.
Momentum indicators point to continued consolidation. The Relative Strength Index (RSI) is hovering around 42, remaining below the neutral 50 level and suggesting that bearish momentum still dominates. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator has turned slightly positive, signaling that the market has yet to establish a clear directional trend.
On the upside, initial resistance stands at the psychological $4,200 level, followed by the 100-day SMA at $4,249 and the 50-day SMA at $4,337. A sustained recovery could encounter further resistance near $4,400 before bringing the 200-day SMA at $4,525 into focus.
On the downside, initial support is located at $4,100. A sustained break below this level could expose the $4,000–$3,950 support zone, potentially extending the broader bearish trend.
Strong US Inflation Pressures Gold
Gold (XAU/USD) extended its intraday losses on Wednesday after stronger-than-expected US inflation data boosted the US Dollar and Treasury yields. At the time of reporting, XAU/USD was trading near $4,095, down 1.57% on the day.
The US Consumer Price Index (CPI) rose by 0.6% month-over-month in September, matching expectations and accelerating from August's 0.4% increase. Annual headline inflation climbed to 3.7% from 3.4%, exceeding the market forecast of 3.6%.
Core CPI, which excludes food and energy prices, increased by 0.3% month-over-month, above expectations of 0.2% and matching the previous month's pace. Annual core inflation accelerated to 2.6% from 2.4%, also surpassing the forecast of 2.5%.
Following the release, the US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, rose to approximately 102.67, its highest level since April 2025. US Treasury yields also rebounded sharply, with the benchmark 10-year yield climbing around 10 basis points to 5.28%.
A stronger US Dollar makes dollar-denominated Gold more expensive for international buyers, while rising Treasury yields increase the opportunity cost of holding the non-yielding precious metal. Both factors typically weigh on Gold prices.
Geopolitical Risks Keep Inflation Elevated
Higher energy prices linked to escalating Middle East tensions remain a key source of inflationary pressure. Persistent threats to oil supplies could keep fuel costs elevated, making it more difficult for inflation to return to the Federal Reserve's 2% target.
Against this backdrop, the Federal Reserve is expected to maintain a restrictive monetary policy stance. Money markets have increased their expectations for additional interest rate hikes through the end of 2027.
Traders are now pricing in a 51% probability of a rate hike at the October 27–28 meeting, up sharply from 22% before the CPI release. The probability of a December rate hike has climbed to nearly 95%, according to the CME FedWatch Tool.
New York Fed President John Williams said on Tuesday that another interest rate increase in 2026 could be appropriate. However, he does not currently anticipate the need for further hikes in 2027 and expects inflation to move toward the central bank's 2% target next year.
Gold Outlook Remains Cautious
Gold's rebound above $4,150 offers some relief after the recent sell-off, particularly as the US Dollar and Treasury yields retreat from their post-CPI highs. Nevertheless, the broader technical outlook remains cautious as XAU/USD continues to trade below its major daily moving averages.
The $4,200 level remains the first major resistance to watch. A decisive break above this threshold could strengthen the recovery, while failure to hold above $4,100 would increase the risk of a deeper decline toward $4,000–$3,950.
For now, Gold traders will continue monitoring US inflation developments, Federal Reserve rate expectations, Treasury yields, and geopolitical risks for fresh directional signals.