Inflation concerns fail to halt gold’s rebound to near $3,900

• Gold regains ground near $3,895 as Monday’s early Asian trading gets under way.
• Bets on a Fed rate hike gain support as rising oil prices stoke inflation concerns.
• A December interest rate increase by the Fed remains the market expectation.

A modest recovery lifts Gold price (XAU/USD) towards $3,895 in early Asian trade on Monday, although expectations of higher US interest rates appear likely to restrict further gains. The precious metal inches up after touching a low of $3,870 in the previous session. Elevated oil prices and concerns over inflation have strengthened expectations of a US rate hike, limiting the scope for a rebound.

Traders are preparing for another week of potentially sharp market swings following the latest sell-off. Continuing tensions in the Middle East, US employment figures and the midterm elections are expected to bring fresh uncertainty to financial markets.

According to The Guardian, Ukraine has restarted attacks on Russian oil refineries after a pause of about two weeks, defying pressure from US President Donald Trump ahead of the US midterm elections. Separately, Iran’s Supreme Leader instructed his senior military commanders to prepare for a fresh confrontation with the US and Israel.

Expectations of further tightening persist despite the Federal Reserve (Fed) leaving interest rates unchanged at its October policy meeting, as the US central bank remains determined to lower inflation. The CME FedWatch tool puts the probability of a December US rate hike priced in by markets at about 72.9%. For non-yielding gold, higher interest rates raise the opportunity cost of ownership.

Simon-Peter Massabni, Head of Business Development at XS.com, said: “The decisive factor will be whether incoming economic data prompt markets to reassess the interest-rate outlook, shifting expectations toward a pause in tightening or a resumption of rate cuts. Until then, gold is likely to remain under selling pressure, despite supportive factors that continue to underpin its medium- to long-term outlook,”

Why Is Gold Failing to Gain From Lower Yields as Fed Hike Risks Persist?

Gold’s rebound has lost momentum, according to strategists at OCBC, who describe prices as “slipping back towards lows of 4000 despite some easing in US Treasury yields and oil prices.” On the economic front, they observe that September “core PCE came in largely as expected at 3.1% YoY, while stronger 3Q26 GDP reinforced the resilience of the US economy,” and contend that the figures “offered little reason for markets to meaningfully pare expectations of another Fed hike in December, following this week’s policy hold.”

Of particular significance to OCBC is that “gold’s inability to benefit from lower yields suggests that fresh buying interest remains limited, even as earlier liquidation pressures may be easing.” The strategists also caution that “renewed weakness in technology equities also weighed on sentiment as it raises concerns over another bout of broader deleveraging.”

OCBC’s assessment of this environment is that “we remain cautious near term, with further consolidation or another test of recent lows not ruled out,” while the strategists identify the key factors ahead: “Friday’s Employment Cost Index and the direction of equities, yields and USD will be important to watch.”

Do Logan’s Calls for at Least Two More Hikes Strengthen the Hawkish Fed Outlook?

A score of 8/10 on the FXS Speechtracker, compared with a historical average of 7.7/10, captures the distinctly hawkish tone of Fed’s Logan and a stronger conviction that tighter policy is needed. Logan’s argument that the Fed “needs at least two more quarter-point rate hikes”, alongside the view that skipping a meeting leaves the policy destination unchanged, signals a firm resolve to make policy “modestly restrictive,” with inflation still considered “unacceptable” against the 2% target. By stressing gradual adjustments and a clear destination for rates, the message seeks to contain downside risks and give households, businesses and investors time to adjust to higher Dollar rates. This comes against a backdrop of robust growth and a balanced labour market that could tighten.

An increase of 0.95 points takes the FXS Fed Sentiment Index to 143.62, leaving it firmly hawkish and in line with Logan’s support for further tightening even if a near-term pause remains possible. At a level well above the neutral 100 mark, the index confirms that the speech puts additional hawkish pressure on Dollar expectations, matching the firmer message reflected in the FXS Speechtracker.

Technical Analysis: Can Gold Shake Off Its Bearish Bias Below the 100-Day SMA?

Bearish pressure remains pronounced on the daily chart as XAU/USD continues to fall below all the major referenced bands and the 100-day simple moving average (SMA). Trading beneath both the middle and lower Bollinger Bands points to a strong downside breakout. Meanwhile, the Relative Strength Index (14), at 32, sits just above oversold territory, indicating stretched bearish momentum without a reversal yet taking shape.

Any rebound first faces resistance near $3,910 at the lower Bollinger Band, before encountering a more significant recovery barrier around $4,085 at the middle band. Further up, the 100-day SMA at $4,210 and the upper Bollinger Band at $4,265 create a substantial resistance zone. Gold would need to regain these levels to temper the prevailing bearish bias and pave the way for a more sustained recovery.

(The technical analysis of this story was written with the help of an AI tool. Know more.)