Rising oil prices from geopolitical tensions are raising inflation expectations and strengthening the case for tighter Fed policy, which in turn weakens support for gold as a safe-haven asset.
Higher energy prices directly increase inflation expectations, prompting markets to price in a longer period of high interest rates. This increases the opportunity cost of holding non-yielding gold.
Markets see little chance of a rate hike at the Fed meeting on 27–28 October, with the probability estimated at just 16.0%. At the same time, traders are pricing in a December rate hike with high confidence, at 90.0%. The prospect of tighter policy in December is keeping the US dollar and bond yields elevated, preventing gold from recovering.
Today, gold is feeling the effects of higher oil prices. As long as the threat of energy supply disruptions remains, the inflation premium will limit XAU/USD’s upside, despite strong demand from central banks.
Technical Analysis
On the H4 chart, XAU/USD remains in a downtrend. The market formed another downward wave towards 4,091 USD, confirming sellers’ dominance. Today, a corrective rise towards 4,103 USD cannot be ruled out, followed by a possible retest from below of previously broken support. Once the correction is complete, the decline is expected to continue towards 4,057 USD. A break below this level would open the way towards the next target at 4,022 USD. The nearest resistance is at 4,127 USD. The MACD indicator confirms that the bearish scenario remains intact: the histogram is in negative territory and the signal line is below zero, indicating persistent selling pressure and limiting prospects for a sustained recovery.
On the H1 chart, XAU/USD broke below support at 4,103 USD and developed downward momentum towards 4,088 USD. The price is currently attempting to stabilise around 4,091 USD. A short-term consolidation range could form, followed by a corrective return towards 4,103 USD. This level is considered key to assessing the next move. If the price closes below it, another downward wave towards 4,057 USD is expected, with scope for a further decline towards 4,022 USD. The Stochastic oscillator is oversold below 20, allowing for a short-term technical rebound. However, a reversal signal has not yet formed. The main scenario for the upcoming trading session remains a continuation of the decline following a possible retest of broken support. A move above 4,127 USD would weaken the current bearish scenario and require a reassessment of the near-term targets.
Conclusion
Gold remains under pressure as rising oil prices, driven by geopolitical tensions, increase inflation expectations and strengthen the case for tighter Fed policy. While markets see only a 16.0% probability of an October rate hike, a December rate hike is priced in with a 90.0% probability, keeping the US dollar and bond yields elevated and weighing on the non-yielding metal. Despite strong central bank demand, the inflation premium continues to limit gold’s upside. Technically, the bearish trend remains intact, with a possible corrective rebound towards 4,103 USD before the decline resumes towards 4,057 USD and potentially 4,022 USD. A move above resistance at 4,127 USD would weaken the current bearish scenario and require a reassessment of the near-term targets.
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