Gold gains ground but struggles to extend its recovery as the US Dollar and Treasury yields stabilise.
Traders await US consumer sentiment and inflation expectations data during American trading hours.
XAU/USD remains confined to the $4,100-$4,200 range, with key daily SMAs capping the upside.
Gold (XAU/USD) trades on the front foot on Friday but struggles to extend its advance as the US Dollar (USD) and US Treasury yields show signs of stabilisation following Thursday’s sharp pullback. At the time of writing, XAU/USD trades around $4,182, up 1.20% on the day, after testing the $4,200 mark, its highest level in a week.
The benchmark 10-year US Treasury yield fell by 11.9 basis points on Thursday, from 5.354% to 5.235%, taking some steam out of the US Dollar rally and helping bullion recover from the two-month lows touched earlier this week.
Strong demand at a US 30-year Treasury auction helped drive the retreat in yields. A pullback in Oil prices also eased pressure on bonds after US President Donald Trump said in a Truth Social post that the United States would not attack Iran before the November midterm elections. Trump's remarks followed earlier reports suggesting Washington was preparing for possible renewed strikes.
However, the downward pressure on the US Dollar and yields fades on Friday as the broader drivers of their recent strength remain intact. Oil prices remain elevated, keeping inflation risks in focus and reinforcing expectations of additional interest-rate hikes by the Federal Reserve (Fed).
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 102.19 after recovering from an intraday low of 101.92. Meanwhile, the 10-year Treasury yield edges back toward 5.25% after briefly falling to around 5.21%.
A firmer US Dollar, Treasury yields near multi-year highs and a hawkish Fed outlook remain major headwinds for Gold, even as central bank purchases and ETF inflows provide underlying support. Higher yields increase the opportunity cost of holding the non-yielding metal, while US Dollar strength makes it more expensive for overseas buyers.
According to the CME FedWatch Tool, traders widely expect the Fed to leave interest rates unchanged at 3.75%-4.00% at its October 27-28 meeting, while pricing in an 85% probability of a rate hike in December.
Recent Fed communication also keeps the door open to additional increases as officials seek to bring inflation back toward the central bank’s 2% target. St. Louis Fed President Alberto Musalem said on Thursday, “To bring inflation back to target, more monetary policy firming will be required.” Fed Governor Christopher Waller struck a similar tone, signalling “additional hikes” if economic data develop as expected.
On the US economic docket, traders now await the preliminary University of Michigan consumer sentiment report for October, alongside 1-year and 5-year inflation expectations.
Technical analysis: XAU/USD remains rangebound below key daily SMAs
XAU/USD remains largely confined to the $4,100-$4,200 range seen since the start of the month, while trading below the 50-day, 100-day and 200-day Simple Moving Averages (SMAs) on the daily chart. The dense overhead moving-average stack suggests rallies remain capped for now, while the Relative Strength Index (RSI) near 44 retains a mild bearish bias.
Meanwhile, the Moving Average Convergence Divergence (MACD) indicator remains negative but has been narrowing, suggesting that selling pressure is easing rather than reversing decisively.
On the topside, initial resistance lies at the $4,200 psychological mark, followed by the 100-day SMA at $4,259 and the 50-day SMA at $4,334. A stronger recovery would face the $4,400 horizontal barrier ahead of the 200-day SMA at $4,529.
On the downside, initial support stands at $4,100. A sustained break below this level could open the door toward the $4,000-$3,950 support zone.
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