Gold Losses Deepen as Higher Oil Prices Bolster Fed Rate Hike Bets

• Gold retreats towards $4,100, with higher energy prices sustaining inflation worries.
• Bullion remains under pressure as traders price in another Fed interest rate increase by December.
• The broader technical picture for XAU/USD stays bearish as prices trade beneath key daily SMAs.

Gold (XAU/USD) remains under selling pressure on Tuesday, heading for a third straight day of losses. Higher Oil prices driven by Middle East tensions are sustaining upside risks to global inflation and bolstering expectations of interest rates staying higher for longer. XAU/USD is trading near $4,123 at the time of writing, a decline of 0.42% for the day.

Supply disruption fears have pushed West Texas Intermediate (WTI) Oil past $100 to its highest level in more than a month. The advance follows Houthi attacks on Saudi energy infrastructure and a rise in attacks on vessels passing through the Strait of Hormuz.

Since the war broke out in late February, high energy prices have remained a major driver of inflationary pressure. This has led major central banks to increase interest rates this year, leaving markets watchful for additional tightening.

Expectations of another Federal Reserve (Fed) rate increase before year-end have strengthened after September’s US Consumer Price Index (CPI) and Producer Price Index (PPI) reports both exceeded forecasts. The Fed continues to seek a return of inflation towards its 2% target.

Following their recent retreat, the US Dollar (USD) and US Treasury yields are finding some downside support from these hawkish expectations. By increasing the appeal of interest-bearing assets, higher borrowing costs put pressure on non-yielding Gold. A firmer US Dollar also raises the metal’s cost for buyers using other currencies.

At around 101.88, the US Dollar Index (DXY) is 0.10% lower on the day, though it remains above last week’s trough of 101.58. The index measures the Greenback against a basket of six major currencies. Meanwhile, the benchmark 10-year US Treasury yield has recovered to roughly 5.13% from last week’s low of 5.03%.

Despite this outlook, traders broadly anticipate no change in Fed interest rates at the October 27–28 meeting. Policymakers appear reluctant to raise rates at consecutive meetings after September’s 25-basis-point increase. According to the CME FedWatch Tool, markets assign a 15% probability to a hike this month and an 89% probability to an increase in December.

With few US economic releases on the calendar, Gold remains exposed to shifts in Oil prices, the US Dollar and Treasury yields. Expectations of a hawkish Fed continue to present a significant obstacle for the metal.

Technical analysis: Can XAU/USD escape its range beneath key daily SMAs?

Since the beginning of the month, XAU/USD has largely stayed within a $4,100 to $4,200 range. The daily chart nevertheless continues to show lower highs and lower lows following the peak near $4,700 in late August.

Some improvement in momentum has yet to lift the metal above its 50-day, 100-day and 200-day Simple Moving Averages (SMAs), leaving the upside constrained. The Relative Strength Index (RSI) is hovering in the low-40s, while the Moving Average Convergence Divergence (MACD) has moved into positive territory above the zero line.

Any advance would first encounter the psychological resistance level of $4,200, ahead of the 100-day SMA at $4,235 and the 50-day SMA at $4,321. Beyond these levels, a more substantial rebound would meet the horizontal barrier at $4,400 before the 200-day SMA at $4,517. Conversely, a sustained move below $4,100 could expose the $4,000-$3,950 support zone.

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