Gold Rebounds Above $4,150 As Yields Fall: Can Warsh Extend It?

Gold price (XAU/USD) edges higher to near $4,165, snapping the three-day losing streak during the early Asian session on Friday. The precious metal rebounds on a weaker US Dollar (USD) and lower US Treasury yields. Traders will closely monitor the speech from Federal Reserve (Fed) Chair Kevin Warsh later in the day for fresh clues on US interest rate outlook.

US Treasury yields dropped in the previous session as traders booked some profits in technology shares and fled to the safety of bonds following the latest US inflation data. The yield on 30-year Treasury bonds fell by more than 8 basis points (bps) to 5.42%. The benchmark 10-year Treasury yield tumbled more than 8 bps to 5.079%, while the yield on two-year notes dropped by more than 5 bps to 4.745%.

Lower bond yields and falling oil prices eased concerns over inflation and the prospect of further US Federal Reserve (Fed) rate hikes, supporting the yellow metal.

Inflation concerns intensified on Thursday after US Producer Price Index (PPI) data also came in hotter than expected. Nonetheless, expectations of an October rate hike eased as traders questioned whether the US central bank would hike interest rates in two consecutive months.

The Fed Funds Futures are pricing in at least one more quarter-point raise by the end of the year, according to the CME FedWatch tool.

Gold support builds as CTAs cover shorts amid softer rates and Dollar

According to TD Securities, “CTAs are covering notable shorts across the precious metals complex as easing rates, also driven by systematic short covering, helped metals such as gold find important support.” The bank notes that “interest rates and Dollar strength have moderated after the initial surge post-CPI data, offering much-needed support to the precious metals complex.” Elsewhere, TD Securities highlights that “macro discretionary positions remain elevated, while ETF inflows and central bank demand also remain strong.” Taken together, “these flows have ultimately offered strong support for gold, and we expect these flows will remain robust, especially in the $4,000-4,100/oz region.”

Hammack flags inflation mindset risk as Fed tone stays firmly hawkish

Fed’s Hammack delivers a moderately hawkish message, with the FXS Speechtracker score at 7.2/10, slightly softer relative to the historical average of 7.6/10. The emphasis on lower-income Americans struggling with inflation, persistent input cost pressures, and the risk of an entrenched “inflationary mindset” points to openness to more aggressive policy if price expectations drift higher. Hammack’s admission that the neutral rate is uncertain and that financial conditions do not appear restrictive reinforces a bias toward keeping policy tight for longer.

The FXS Fed Sentiment Index slipped by 0.25 points to 127.92, signaling a minor pullback in hawkish intensity versus recent readings. Despite the decline, the index remains well above the neutral 100 threshold, confirming that Fed communication is still firmly in hawkish territory even as the latest speech scores slightly below the established baseline on the FXS Speechtracker.

Technical Analysis: Gold remains capped under the 100-day SMA

In the daily chart, XAU/USD holds a bearish near-term bias as it sits beneath the 20-day Bollinger middle band and the 100-day moving average. The price is closer to the Bollinger lower band than to the upper envelope, while the Relative Strength Index (14) around 45 stays below the mid-50s zone, hinting at subdued, consolidative momentum rather than an imminent bullish reversal.

On the topside, initial resistance is located at the Bollinger middle band near $4,200, followed by the 100-day moving average around $4,245, with the Bollinger upper band near $4,370 acting as a more distant cap if buyers attempt a stronger recovery. On the downside, the first notable support emerges at the 20-day Bollinger lower band around $4,035, where a decisive break would open the door to a deeper corrective leg in the broader downbeat structure.