Gold falls to $4,150 as oil-driven inflation fears lift Fed hike bets and US bond yields

Gold kicks off the new week on a downbeat note amid rising October Fed rate hike bets.
Oil-driven inflation risks keep US bond yields elevated, further undermining the commodity.
The US-Iran standoff acts as a tailwind for the safe-haven USD, favouring XAU/USD bears.

Gold (XAU/USD) extends its intraday decline, hitting a fresh low since August 5 near $4,150 during the early European session on Monday amid a bearish fundamental backdrop. The US Federal Reserve’s (Fed) hawkish stance earlier this month, along with oil-driven inflation fears, keeps US bond yields pinned near multi-year highs. This, in turn, is seen as a key factor driving flows away from the non-yielding bullion.

The Fed raised its benchmark interest rate in mid-September 2026—its first rate increase in three years—and signaled that another hike is likely before the end of this year. Moreover, Fed speakers are leaning toward potential further policy tightening amid inflation risks stemming from rising energy prices. According to CME Group’s FedWatch Tool, traders are currently pricing in around a 68% chance that the US central bank will raise borrowing costs in October.

USD supported as Fed hawks keep tightening risks in focus

Strategists at OCBC note that “resilient US economic data, elevated energy prices and persistent inflation concerns continue to drive Treasury yields higher,” a backdrop that is “underpinning the USD while weighing on rate-sensitive and carry-oriented assets.” They add that “recent Fed rhetoric has also remained hawkish,” pointing to comments from New York Fed President Williams and Cleveland Fed President Hammack, who “warned that inflation risks remain skewed to the upside,” while Philadelphia Fed President Paulson cautioned that “modest further tightening may still be warranted if inflation fails to moderate.” In their view, this is reflected in current market pricing, which “implies around a 70% probability of another 25bp rate hike in October, highlighting the market’s growing conviction that the Fed’s inflation fight is not yet over.”

Adding to this, geopolitical uncertainties act as a tailwind for the US Dollar (USD), which exerts additional pressure on the commodity. In the latest developments surrounding the Middle East crisis, US President Donald Trump on Saturday rejected an Iranian proposal to reopen the Strait of Hormuz immediately on meeting their terms and end fighting. Trump added on Sunday that additional military strikes on Iran were possible before the midterm elections in the US.

Furthermore, Houthis continued their attacks on Saudi Arabia, while Yemen’s government forces intensified attacks against the Iran-backed group, conducting multiple air and ground operations. This adds to worries about a broader regional conflict, prompting traders to again price in the geopolitical risk premium. This, in turn, supports oil prices and underpins the safe-haven Greenback, which backs the case for a further depreciating move for the Gold price.

Traders now look forward to speeches from FOMC members, which, along with the incoming geopolitical headlines, will drive the USD and the XAU/USD pair. Traders this week will further confront the release of the US Personal Consumption Expenditures (PCE) Price Index and the final Q2 GDP print on Wednesday, ahead of the popularly known US Nonfarm Payrolls (NFP) report on Friday, which will influence Fed hike expectations and provide a fresh impetus.

XAU/USD daily chart

Technical Analysis

The XAU/USD pair confirms a fresh breakdown below the 61.8% Fibonacci retracement level of the June-August upswing following the recent repeated failures near the 100-period Exponential Moving Average (EMA). Moreover, the Moving Average Convergence Divergence (MACD) indicator remains negative with a declining profile, while the Relative Strength Index (RSI) has slipped toward 38, hinting at persistent selling pressure.

Meanwhile, any further slide could find some support at the 78.6% retracement at $4,099, ahead of a more substantial structural floor at the prior swing low near $3,939, where sellers may begin to hesitate. On the topside, initial resistance is seen at the 61.8% Fibo. retracement at $4,226, followed by the 50.0% retracement at $4,314 and the 100-period EMA at $4,352, with higher hurdles at $4,403 and $4,513.