Gold Price Forecast: XAU/USD Rebounds From $4,070 as Fed Pause Bets Clash With 5.3% Yields

Quick overview

Gold (XAU/USD) is trading near $4,136 and is currently rebounding from the $4,070 support area. Overall, the outlook is mixed. According to the latest Fed meeting minutes, policymakers generally expect another rate hike before the end of the year. Currently, markets are pricing in a 18% chance of a rate hike in October compared to an 80% chance for December. With the 10-year Treasury yield at around 5.3%, the opportunity cost of holding gold remains elevated.

My near-term bias remains neutral-to-bearish while gold trades below $4,179. Longer-term, the fundamental case for gold is stronger than the price action reflects. For example, continued inflows into gold ETFs and the China gold purchase program, are taking place in the face of financially restrictive conditions.

Fed Minutes Keep December Tightening Risk Alive

The September minutes confirmed that policymakers unanimously supported increasing the benchmark rate by 25 basis points. The minutes also showed differences in the reasoning, with some participants emphasizing energy and supply-driven inflation risks while others focused on broader demand pressures.

The focus for gold is that most participants still assessed that a policy rate increase by year-end would probably be appropriate. This implies that market participants are not fully discounting the end of the U.S. policy rate hiking cycle and are instead focused on a potential rate hike pause in October. From a gold price perspective, this is a headwind as the pangs of December Fed rate hike anticipation keep yields and the U.S. dollar elevated, even if the Fed holds steady this month.

October Pause Looks Likely, but December Is Still Live

Interest-rate futures currently price the likelihood of an October hike at around 18% compared to around 80% for December. This gap seems to suggest that the Fed will need to see more information before acting again, as opposed to the market pricing in a scenario in which the Fed will take a break from hiking for an extended period.

For the time being, this view remains somewhat supportive for gold, as the immediate policy pressure has lessened, but December’s relatively high probability keeps a strong monetary backdrop from being bullish for gold. For a more bullish outlook, gold would likely need either weaker inflation or a more negative development in the labor market.

5.3% Treasury Yield Remains the Main Headwind

Bullion remains under pressure due to the direction of U.S. Treasury yields. The World Gold Council reported the U.S. 10-year Treasury yield rose approximately 53 basis points in September to around 5.3%, with the U.S. Dollar Index also rising roughly 2% over the same period.

Higher yields and a stronger U.S. dollar raise the opportunity cost of gold and increase the price of gold for other countries, respectively. This was the case in September when gold remained under pressure in spite of a build-up in institutional demand.

ETF Demand Shows Institutional Resilience

I’m interested to see how, with increasing bond yields, demand for ETFs remained strong. According to data for September, the world’s gold ETFs registered inflows of roughly $10 billion, the equivalent of 67 metric tons.

I see this as further evidence that gold is being regarded as a strategic portfolio hedge. From a more tactical asset allocation perspective, gold’s storage of value would make sense as the Fed Funds rate, and other similarly correlated rates, decrease.

China Extends Buying Streak to 23 Months

There’s more evidence of China growing its gold reserves as, for the 23rd month in a row, the PBOC increased its official gold holdings, ending September at 77.47 million fine troy ounces, from 76.73 million ounces in August.

This represents an increase of 740,000 ounces of gold in a single month. As with China’s other gold buying, these purchases reflect China’s focus on strategic diversification of the country’s foreign reserves and are not related to the short term volatility of gold prices or elevated U.S. bond yields.

Central Banks Still Provide a Long-Term Floor

Although there may be some changes to the activities of official sectors of the economy, the broad outlook will remain favorable for the gold market. Central bank gold purchases are expected at 720 tonnes in 2026, which would be a relative decline from 2025 levels, but still be significantly higher than pre-2022 purchasing levels. As a result, gold will likely continue benefiting from the structural shift in global reserve management.

From an economic and geopolitical perspective, it is likely that government debt and credit risk concerns will remain, providing support for a bullion presence in official reserves.

Gold Technical Analysis: $4,179 Is the First Major Recovery Test

The price of gold is presently trading around $4,136, having bounced off the $4,070 area. However, the broader picture is still bearish because the price is still trading below both the moving averages and the descending trendline. Therefore, I am looking for a potential recovery toward $4,179 before another move lower.

The first resistance I see is at $4,179. Breaking through this level would expose $4,222-4,227 and $4,298. On the other hand, we have $4,109 as first strong support, and if we break down below it, support levels at $4,070 and $4,021 come into play.

RSI is at around 48, slightly above the signal line at 46, meaning the momentum is neutral, but tilting slightly to the upside. Until the price of gold breaks above $4,179, and the downsloping trendline, I will keep a bearish bias. A break above $4,227 would bring a more bullish bias, and a break below $4,109 would put $4,070 in the crosshairs again.

Resistance: $4,179, $4,222-4,227, $4,298

Support: $4,109, $4,070, $4,021

Frequently Asked Questions

Why is gold still under pressure despite lower October hike odds?

Despite lower odds of an October rate hike, the fed is still expected to raise rates in December, keeping the environment restrictive. Plus, Treasury yields are still very high.

What is supporting gold fundamentally?

Strong ETF inflows, continued Chinese buying and broader central-bank reserve diversification have created a structural floor.

What is the key XAU/USD breakout level?

The first key level to break higher is at $4,179. A bullish shift for gold would require an important close above $4,222/27.

Arslan Ali Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Ali Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.

His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.

His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.