Near $3,900: Gold retreats as US yields rise and hawkish Fed bets mount

Gold retreats towards roughly $3,900 as Middle East uncertainty resurfaces.
4.954%: US 10-year Treasury yields advance four basis points.
The probability of a December Fed rate hike increases to 79%, intensifying pressure on bullion.

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

XAU/USD Under Pressure From Oil Recovery, Firmer US Data and Elevated Treasury Yields

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Uncertainty over how the US-Iran conflict will end is pressuring Gold, which currently has a negative correlation with West Texas Intermediate (WTI), the US crude benchmark. Headlines have been mixed. According to the New York Times, Israeli intelligence reported that Iran is considering using chemical weapons.

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

September’s Job Openings and Labor Turnover Survey (JOLTS) showed US job vacancies increasing 4.5% month on 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 at 3.3%.

US Census Bureau figures also showed Factory Orders growing 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. Tracking the currency against six peers, the DXY is now broadly flat at 101.78.

A firmer US Dollar and rising US Treasury yields are driving bullion sharply lower. The 10-year Treasury note yield has gained 4 basis points to 4.954%.

Higher expectations of a Federal Reserve (Fed) rate increase in December are also keeping XAU/USD under bearish pressure. According to the CME’s FedWatch Tool, traders now assign a 79% probability to a hike, 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 tons to 200 metric tons. It nevertheless lifted its projection for central bank purchases.

US midterm elections are another focus for commodity traders. Prediction sites such as Polymarket put the probability of Democrats regaining a House majority at around 95%. The odds for the US Senate are near 73%, a result that would give the Democrats a sweep.

Wednesday’s calendar also brings the ADP Employment Change report and October’s ISM Services Purchasing Managers’ Index (PMI), both of which are in focus.

$3,900 in Focus: XAU/USD Technical Outlook as Gold Struggles for Momentum

XAU/USD is giving back ground following Monday’s advance. It has not, however, set a lower low, pointing to sideways trading. The Relative Strength Index (RSI) shows momentum slipping towards bearish territory, suggesting more downside in the near term.

A break below $3,900 would expose the year-to-date low of $3,879 set on 30 October. Below that lies $3,500, the daily high recorded on 22 April 2025 that has since become support.

Conversely, a recovery above $4,000 would allow buyers to test a key resistance trendline around $4,050-$4,070, followed by $4,100.

Gold: Key Questions

What attracts investors to Gold?

Widely used to preserve value and facilitate exchange, Gold has held an important place throughout human history. Today, its appeal extends beyond its lustre and use in jewellery. The precious metal is broadly regarded as a safe-haven asset and therefore a good investment in periods of turmoil. Because it does not depend on a particular issuer or government, Gold is also widely viewed as a hedge against inflation and currency depreciation.

Which buyers hold the most Gold?

The largest holders of Gold are central banks. To support their currencies during turbulent periods, they typically diversify reserves and purchase Gold, reinforcing perceptions of economic and currency strength. Substantial Gold reserves can bolster confidence in a country’s solvency. World Gold Council data show that central banks expanded their reserves by 1,136 tonnes of Gold in 2022, worth around $70 billion. That marked the largest annual purchase on record. Emerging-economy central banks, including those in China, India and Turkey, are rapidly building their Gold reserves.

How does Gold move relative to other assets?

Both the US Dollar and US Treasuries are major reserve and safe-haven assets, and Gold is inversely correlated with them. A falling Dollar generally supports Gold, allowing investors and central banks to diversify their holdings during unsettled periods. Gold also tends to move in the opposite direction to risk assets. Equity market gains usually weigh on Gold prices, whereas selling in riskier markets typically benefits the precious metal.

Which factors drive Gold prices?

Many factors influence Gold prices. Its safe-haven appeal means geopolitical instability or concerns about a severe recession can trigger rapid gains. Since Gold pays no yield, lower interest rates tend to support it, while higher borrowing costs generally exert downward pressure. Most price movements nevertheless hinge on the US Dollar (USD), as Gold is denominated in dollars (XAU/USD). Dollar strength typically restrains Gold prices; a weaker Dollar is more likely to lift them.