Gold falls toward $4,100 as rising energy prices keep inflation concerns elevated.
Traders expect another Fed interest rate hike by December, keeping pressure on bullion.
XAU/USD remains below its key daily SMAs, keeping the broader technical outlook bearish.
Gold (XAU/USD) drifts lower on Tuesday as rising Oil prices linked to tensions in the Middle East keep global inflation risks tilted to the upside, reinforcing expectations that interest rates will remain higher for longer. However, a softer US Dollar (USD) and lower US Treasury yields help contain the downside. At the time of writing, XAU/USD trades around $4,123, down 0.42% on the day.
West Texas Intermediate (WTI) Oil climbs above $100, reaching its highest level in more than a month as Houthi attacks on Saudi energy infrastructure and an increase in attacks on vessels in the Strait of Hormuz fuel concerns over supply disruptions.
Elevated energy prices remain a key source of inflation pressure since the war erupted in late February, prompting major central banks to raise interest rates this year and keeping markets alert to further tightening.
In the United States, September’s Consumer Price Index (CPI) and Producer Price Index (PPI) reports both came in hotter than expected, strengthening expectations that the Federal Reserve (Fed) could deliver another rate hike before year-end as it seeks to bring inflation back toward its 2% target.
These hawkish expectations could limit a deeper decline in the US Dollar and Treasury yields following their recent pullback. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.76, down 0.23% on the day, after approaching 103 last week, its highest level since April 2025. Meanwhile, the benchmark 10-year US Treasury yield stands near 5.08%, down from around 5.36% earlier this month.
However, traders widely expect the Fed to leave interest rates unchanged at its October 27-28 meeting, as policymakers appear cautious about delivering back-to-back increases following September’s 25-basis-point hike. The CME FedWatch Tool shows traders pricing in a 17% chance of a rate hike this month and a 92% chance of an increase in December.
Looking ahead, a light US economic calendar leaves Gold vulnerable to movements in Oil prices, the US Dollar and Treasury yields, with the hawkish Fed outlook acting as a strong headwind.
Technical analysis: XAU/USD remains rangebound below key daily SMAs
On the daily chart, XAU/USD maintains a pattern of lower highs and lower lows since peaking near $4,700 in late August, although prices remain largely trapped between $4,100 and $4,200 since the start of the month.
The metal trades below the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), which reinforces a capped tone despite some improvement in momentum, with the Relative Strength Index (RSI) hovering in the low-40s and the Moving Average Convergence Divergence (MACD) turning positive above the zero line.
On the topside, initial resistance lies at the $4,200 psychological mark, followed by the 100-day SMA at $4,235 and the 50-day SMA at $4,321. A stronger recovery would face the $4,400 horizontal barrier ahead of the 200-day SMA at $4,517. On the downside, a sustained break below $4,100 could open the door toward the $4,000-$3,950 support zone.
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