Gold (XAU/USD) declined on Monday as investors prepared for a Federal Reserve meeting, expecting interest rates to drop for the third consecutive time as we approach 2026. Currently, XAU/USD is priced at $4,195, down 0.27% after reaching a daily peak of $4,219.
The US Treasury faces mounting pressure to create money. Fed decisions and geopolitics will influence the outlook
Increasing U.S. Treasury yields are limiting gains for bullion, with sellers driving spot prices below $4,200. The anticipated Fed rate cut on Wednesday might lift gold prices, as non-yielding metals usually perform better in a low-interest-rate climate, suggesting potential for further increases soon.
The result of the meeting could impact gold’s trajectory; a “hawkish cut” might halt gold’s rise. In contrast, ongoing tensions between Russia and Ukraine could bolster demand for the yellow metal, which has surged nearly 60% this year.
On Tuesday, the U.S. will release statistics that include a four-week average of ADP employment changes, along with job openings and turnover (JOLTS) reports for September and October.
Factors influencing today’s market: US Treasury yields, pressures on gold prices
- US government bond yields are on the rise, with the benchmark 10-year bond rate increasing almost 3 basis points to 4.168%. Similarly, U.S. real yields, which have an inverse relationship to gold, also rose 3 basis points to 1.908%, creating challenges for bullion.
- The US dollar index (DXY), which reflects the value of the US dollar against a group of six other currencies, increased by 0.11% to 99.09.
- Geopolitical events also affect gold prices, with reports that Ukrainian President Volodymyr Zelenskiy met European leaders in London while the U.S. pressures Kyiv to accept a proposed peace agreement with Russia. Zelenskiy commented that China shows little interest in persuading Russia to stop its conflict with Ukraine.
- Last week’s inflation figures in the U.S. remained steady around 3%, potentially paving the way for another 25 basis point rate cut. According to Capital Edge data, money markets indicate an 86% likelihood of the Fed implementing that cut.
- Morgan Stanley predicts that gold could see further growth, driven by a weaker U.S. dollar, demand for ETFs, central bank acquisitions, and safe-haven interest.
- Additionally, Nikkei Asia reported a significant earthquake in the Tohoku region, mentioning, “Late Monday night, a powerful earthquake with a preliminary magnitude of 7.6 struck the northeastern region of Japan, prompting the Japan Meteorological Agency to issue a tsunami warning for Hokkaido and areas along Aomori and Iwate prefectures.”
Technical Analysis: Gold price dips below $4,200
While gold’s upward trend continues, buyers are struggling to maintain spot prices above $4,200, which may suggest a downturn ahead. The Relative Strength Index (RSI) indicates that bullish momentum is fading and has plateaued, signifying potential fatigue among buyers as we approach the FOMC decision.
If XAU/USD manages to exceed $4,200, a test of $4,250 and $4,300 could be expected, with a breakthrough of the latter potentially leading to an all-time high of $4,381. On the other hand, a drop below the 20-day simple moving average (SMA) around $4,144 could lead to a decline toward $4,100, alongside a 50-day SMA of $4,076.
