Gold retreats near $3,900 as US yields rise and markets bet on a hawkish Fed

• Gold retreats towards the vicinity of $3,900 as Middle East uncertainty resurfaces.
• A four-basis-point rise takes US 10-year Treasury yields to 4.954%.
• The probability of a December Fed rate rise increases to 79%, putting further pressure on gold.

At $3,926 at the time of writing, Gold (XAU/USD) is down 0.45% on Tuesday as tensions in the Middle East remain elevated. Oil prices have pared their earlier losses, strengthening the US Dollar’s safe-haven appeal given the positive correlation between the two.

XAU/USD falls as recovering Oil, firmer US data and elevated Treasury yields weigh on Gold

Uncertainty over the outcome of the US-Iran conflict is putting pressure on Gold, which currently has a negative correlation with West Texas Intermediate (WTI), the US crude benchmark. Among the conflicting headlines, the New York Times reported that Israeli intelligence had shared information suggesting Iran is considering using chemical weapons.

Reports earlier suggested Washington and Tehran were nearing an agreement. Iran rejected those claims, however, according to the IRIB news agency.

September’s Job Openings and Labor Turnover Survey (JOLTS) showed US vacancies increasing by 4.5% on the month, from 7.19 million to 7.5 million. The hiring rate edged up to 3.4% from 3.3%, while the total separations rate held steady at 3.3%.

Separately, the US Census Bureau reported that Factory Orders rose 1.8% MoM in September, compared with 0.3% MoM in the preceding month.

Against this backdrop, the US Dollar regained some ground after the US Dollar Index (DXY) touched an intraday low of 101.62. Measuring the currency against six peers, the DXY is now little changed at 101.78.

Alongside the pressure from the US Dollar, rising US Treasury yields are driving a sharp decline in bullion prices. The 10-year Treasury note yield is 4 basis points higher at 4.954%.

A further source of bearish pressure on XAU/USD is the increased likelihood traders assign to a December Federal Reserve (Fed) rate rise. According to the CME’s FedWatch Tool, those odds have climbed to 79%, compared with 74% a day earlier.

Citing softer demand for bars and coins, the World Gold Council cut its Gold investment growth forecast from 400 metric tonnes to 200 metric tonnes. It nevertheless lifted its forecast for central bank purchases.

The US midterm elections are also in focus for commodity traders. Prediction platforms such as Polymarket put the probability of Democrats regaining a House majority at around 95%. Their chances of taking the US Senate stand near 73%, which would give the Democrats control of both chambers.

Wednesday’s releases will also draw attention, with the ADP Employment Change report and October’s ISM Services Purchasing Managers’ Index (PMI) both on the agenda.

XAU/USD technical outlook: Gold loses momentum and pulls back towards $3,900

Although XAU/USD has pulled back following Monday’s gains, it has yet to set a lower low, suggesting the market remains rangebound. The Relative Strength Index (RSI), however, shows momentum drifting lower into bearish territory, pointing to further near-term downside.

A break below $3,900 would leave Gold poised to test the year-to-date low of $3,879 set on 30 October. Beyond that lies $3,500, the daily high from 22 April 2025, which has since become support.

Conversely, a recovery above $4,000 by buyers would open up a test of the key resistance trendline around $4,050-$4,070, with $4,100 the next level to watch.