- Gold rebounds from intraday lows as US-Iran diplomatic hopes send Oil prices sharply lower.
- Expectations of another Fed rate hike before year-end keep Gold’s upside in check.
- XAU/USD remains below its key daily SMAs, keeping the broader technical outlook bearish.
Gold (XAU/USD) reverses earlier losses on Tuesday as positive Middle East headlines trigger a sharp pullback in Oil prices, weighing on the US Dollar (USD) and US Treasury yields. At the time of writing, XAU/USD trades around $4,143, recovering from an intraday low of $4,111.
Israel’s Channel 12 News reported that a proposal presented by Pakistan’s army chief to senior Iranian officials has received American approval and preliminary agreement from Iran. The plan reportedly includes transferring interest earned on $6 billion of Iranian funds frozen in Qatari banks to Tehran, partially addressing Iran’s demand for the return of frozen assets.
West Texas Intermediate (WTI) Oil retreats toward $95.65 after briefly climbing above $100 earlier in the day. The reversal eases some energy-driven inflation concerns, pulling US Treasury yields lower and helping the non-yielding metal recover.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.55, its lowest level since October 1, extending its pullback from the 18-month high near 103 touched last week. Meanwhile, the benchmark 10-year US Treasury yield stands near 5.09%, down 5 basis points (bps) on the day.
However, the metal’s gains remain in check as Oil prices remain above pre-war levels, while fighting between Saudi Arabia and the Houthis and increased attacks on vessels in the Strait of Hormuz keep supply risks elevated. Higher energy costs have been a key source of inflation pressure since the war erupted in late February.
In the United States, September’s Consumer Price Index (CPI) and Producer Price Index (PPI) reports both came in hotter than expected, strengthening expectations that the Federal Reserve (Fed) could deliver another rate hike before year-end as it seeks to bring inflation back toward its 2% target.
Traders nevertheless widely expect the Fed to leave interest rates unchanged at its October 27–28 meeting, as policymakers appear cautious about delivering back-to-back increases following September’s 25-basis-point hike. The CME FedWatch Tool shows traders pricing in a 17% chance of a rate hike this month and a 92% chance of an increase in December. These hawkish expectations could limit a deeper decline in the US Dollar and Treasury yields, keeping a lid on Gold’s recovery.
Technical analysis: XAU/USD remains rangebound below key daily SMAs
On the daily chart, XAU/USD maintains a pattern of lower highs and lower lows since peaking near $4,700 in late August, although prices remain largely trapped between $4,100 and $4,200 since the start of the month.
The metal trades below the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), which reinforces a capped tone despite some improvement in momentum, with the Relative Strength Index (RSI) hovering in the low-40s and the Moving Average Convergence Divergence (MACD) turning positive above the zero line.
On the topside, initial resistance lies at the $4,200 psychological mark, followed by the 100-day SMA at $4,235 and the 50-day SMA at $4,321. A stronger recovery would face the $4,400 horizontal barrier ahead of the 200-day SMA at $4,518. On the downside, a sustained break below $4,100 could open the door toward the $4,000-$3,950 support zone.
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