Forex News
- Thirty-year yield touches 22-year high as long-end pressure builds.
- Fed hawks lift year-end tightening odds after September rate increase.
- Rising inflation expectations keep 10-year yield anchored near 5.20%.
US Treasury yields turned mixed on Friday as the long-end of the curve, the 20s and 30s, posted gains while the short-end and the belly of the yield curve retreated to multi-year high levels. The US 10-year Treasury yield holds firm at 5.20% after peaking at a 19-year high of 5.228%.
Long-end yields climb while Fed tightening bets keep 10-year near 5.20%
During the session, the 30-year bond yield rose to its highest level in 22 years. Hawkish commentary from Federal Reserve officials and last week's 25-basis-point rate hike were the two main catalysts that pushed US Treasury yields higher during the week.
The sudden shift from known doves, New York Fed John Williams (voter) and Philadelphia Fed Anna Paulson (voter in 2026), had increased the hawkish tilt in the FOMC board. Also, Fed Governor Michael Barr, acknowledging the need for further rate hikes on Wednesday, has almost cemented the case for a 25-basis-point rate hike towards the end of the year.
Money markets see a 64% chance of a Fed rate hike in the October 28 meeting, according to Prime Terminal. For the December meeting, the chances are higher at 92%.
Worldwide yields remain underpinned by high Oil prices as the US-Iran war continues to prolong, keeping inflationary pressures elevated.
Data-wise, US Consumer Sentiment deteriorated, with households seeing a leg up on inflation for one year from 4% to 4.6% and for a five-year period from 3.3% to 3.4%. Earlier, core capital goods increased 1.6% in August, boosted by the investment boom in AI.
The yield on the 30-year bond was last unchanged at 5.488%, after peaking at 5.5016%, the highest level since June 2004.
US 10-year Treasury yield chart
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
ING’s Asia-Pacific research notes that South Korea’s upcoming data should show stronger industrial production and a widening trade surplus, even as export and import growth moderates. Technology and semiconductor exports are expected to underpin the surplus. At the same time, headline CPI is forecast to ease slightly, with core inflation decelerating more sharply, pointing to reduced underlying price pressures.
Stronger output with softer inflation
"South Korea releases August industrial production data on Wednesday. Market consensus expects industrial production growth to accelerate to 4.5% YoY, from 3.6% in July. Monthly output is forecast to rise 0.5%."
"September trade data, out Thursday, is expected to show a moderation in both export and import growth to 61.2% YoY and 20.7% YoY, respectively."
"Despite slower growth, the trade surplus is forecast to widen to $38.4bn, supported by continued strength in technology and semiconductor exports."
"Headline CPI inflation is expected to ease to 3.0% YoY in September, from 3.1% in August. Core inflation is forecast to slow more sharply to 2.8% YoY, from 3.4%."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Societe Generale describes a limited impact from President Xi’s US visit, with no new tariff cuts or AI dialogue mechanism agreed as the trade truce was only extended to January. USD/CNY rebounded after briefly dipping below 6.70, helped by higher US Treasury yields and a modest easing of PBoC control, while the central bank reiterated a moderately loose stance and commitment to Yuan stability.
Policy support and controlled flexibility
"China and US extend trade truce until January, but no major new outcomes emerged from President Xi's visit - even the much-anticipated agreements on additional tariff cuts and an AI dialogue mechanism failed to materialize."
"USD/CNY bounced back after a brief move below 6.70 as higher Treasury yields combined with a modest easing of the PBoC’s grip on the currency."
"The PBoC reiterated its commitment to a moderately loose monetary stance, pledged to keep the yuan broadly stable and signalled a willingness to adjust policy tools as required. Chinese banks left both the 1y and 5y loan prime rates unchanged at 3.0% and 3.50%, respectively."
"Liquidity support was stepped up, with the PBoC raising the daily reverse repo cap to CNY1tn and injecting a net CNY200bn through MLF operations."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Cleveland Federal Reserve (Fed) President Beth Hammack said on Friday the two sides of the Fed's dual mandate are not in conflict. She said that “high inflation complicates economic planning,” and that she doesn’t see current policy as restraining the economy.
Hammack added that inflation expectations are “well anchored.”
Key highlights:
There are lots of long-term questions on what AI will mean for inflation
Sides of Fed mandates are generally not in conflict
Persistently high inflation has 'real costs', pressures wages
High inflation complicates economic planning
Fed policy is not restraining activity outside of housing
Don't see current policy as restraining the economy
Rising bond yields driven by a number of factors
Good economic outlook is pressuring up bond yields
Some of what the bond market is doing is in reaction to the Fed and government policy
AI investment demand is competing for investors in the bond market
Inflation expectations are reasonably well anchored
The US is on an unsustainable fiscal path
I am mindful of financial conditions, but the Fed is the decision maker on monetary policy
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.16% | -0.23% | -1.08% | 0.05% | -0.24% | -0.07% | 0.05% | |
| EUR | 0.16% | -0.07% | -0.91% | 0.22% | -0.08% | 0.07% | 0.20% | |
| GBP | 0.23% | 0.07% | -0.83% | 0.28% | -0.01% | 0.15% | 0.27% | |
| JPY | 1.08% | 0.91% | 0.83% | 1.16% | 0.85% | 1.01% | 1.14% | |
| CAD | -0.05% | -0.22% | -0.28% | -1.16% | -0.30% | -0.14% | -0.02% | |
| AUD | 0.24% | 0.08% | 0.01% | -0.85% | 0.30% | 0.16% | 0.29% | |
| NZD | 0.07% | -0.07% | -0.15% | -1.01% | 0.14% | -0.16% | 0.14% | |
| CHF | -0.05% | -0.20% | -0.27% | -1.14% | 0.02% | -0.29% | -0.14% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
UOB’s Quek Ser Leang and Lee Sue Ann note USD/SGD held steady around 1.2800 after Wednesday’s surge, with the Singapore Dollar (SGD) supported by expectations of further MAS tightening. Their Singapore Dollar (SGD) Nominal Effective Exchange Rate (NEER) model sits 1.76% above the mid-point, implying a USD/SGD range of 1.2764–1.2828 today, while renewed Dollar momentum keeps focus on resistance at 1.2835.
Dollar holds firm against Singapore Dollar
"24-HOUR VIEW: Following the strong surge on Wednesday, USD consolidated between 1.2788 and 1.2811 yesterday, closing unchanged at 1.2800. USD is likely to continue to consolidate today, probably between 1.2780 and 1.2815."
"1-3 WEEKS VIEW: We turned positive on USD two weeks ago. In our most recent narrative from two days ago (23 Sep, spot at 1.2750), we noted that “upward momentum is starting to ease, and a break below 1.2725 (‘strong support’ level) would indicate that the advance in USD has stalled.” USD subsequently surged to a high of 1.2813. The renewed upward momentum suggests USD could test the significant resistance level at 1.2835 (we highlighted this level on 17 Sep, as well as in the 1-3 months view below). On the downside, the ‘strong support’ level is now at 1.2770."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
European Central Bank (ECB) Vice President Boris Vujcic said on Friday that the ECB started a tightening cycle and sees a “risk of higher for longer energy prices." He added that diesel prices will stay high for a long time, feeding into inflation.
Key highlights:
We have started a tightening cycle
See risk of higher for longer energy prices
It seems the price of crude will come down but not that of refined products
Diesel prices will stay for long, feeding into inflation
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.14% | -0.23% | -1.05% | 0.07% | -0.24% | -0.06% | 0.07% | |
| EUR | 0.14% | -0.09% | -0.90% | 0.21% | -0.10% | 0.06% | 0.20% | |
| GBP | 0.23% | 0.09% | -0.81% | 0.30% | -0.02% | 0.16% | 0.29% | |
| JPY | 1.05% | 0.90% | 0.81% | 1.14% | 0.81% | 0.98% | 1.13% | |
| CAD | -0.07% | -0.21% | -0.30% | -1.14% | -0.32% | -0.15% | -0.02% | |
| AUD | 0.24% | 0.10% | 0.02% | -0.81% | 0.32% | 0.18% | 0.31% | |
| NZD | 0.06% | -0.06% | -0.16% | -0.98% | 0.15% | -0.18% | 0.15% | |
| CHF | -0.07% | -0.20% | -0.29% | -1.13% | 0.02% | -0.31% | -0.15% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
OCBC strategists Sim Moh Siong and Christopher Wong report that Asian FX traded broadly softer as higher Oil prices and rising US Treasury yields hurt risk sentiment, with Indonesian Rupiah (IDR) underperforming and Philippine Peso (PHP), Indian Rupee (INR) and Thai Baht (THB) also weaker. Renminbi (RMB) momentum faded as People's Bank of China's (PBoC) stronger fix trend stalled, while holiday closures in China, South Korea and Taiwan are expected to thin liquidity and potentially increase volatility.
Regional currencies under pressure
"Asian FX traded broadly softer as higher oil prices and US Treasury yields weighed on risk sentiment. IDR underperformed, while PHP, INR and THB also weakened."
"A firmer USD added to the pressure, while RMB gains lost momentum after the recent strengthening trend in the PBoC fix was halted. On the other hand, USD/SGD held steady but near recent highs."
"Market liquidity is expected to drop to razor-thin today, with China, South Korea and Taiwan closed for the Mid-Autumn/Chuseok holidays. And next week, China golden-week holidays start on Thu."
"Near term, elevated oil prices and US Treasury yields may continue to weigh on Asian FX, in differentiated magnitude while thinner liquidity could see moves turn choppier into the weekend."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
The Cleveland Federal Reserve (Fed) President Beth Hammack said on Friday that “the biggest risk with inflation is the formation of an inflationary mindset”, in a panel discussion hosted by the Cleveland Fed, with Vujcic, the Vice President of the European Central Bank (ECB), and Bank of Mexico's (Banxico) Deputy Governor Jonathan Heath.
Hammack reiterated that the Fed needs to make progress in lowering inflation and that it is important to have restrictive policy rates.
Key highlights:
The biggest risk with inflation is the formation of an inflationary mindset
The public has been dealing with above-target inflation for an extended period
Growth has held up well, the job market is stable.
Worried about demand-related pressure on inflation
Capital expenditures will pressure inflation for a while
If we don't make progress lowering inflation, expectations could shift.
Consumer spending and CAPEX are sources of pressure
Important to have restrictive policy rates
The Fed needs to make sure policy is at a restrictive stance to lower inflation
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.10% | -0.19% | -0.99% | 0.10% | -0.21% | -0.01% | 0.15% | |
| EUR | 0.10% | -0.09% | -0.88% | 0.21% | -0.08% | 0.11% | 0.24% | |
| GBP | 0.19% | 0.09% | -0.79% | 0.30% | -0.01% | 0.17% | 0.32% | |
| JPY | 0.99% | 0.88% | 0.79% | 1.11% | 0.78% | 0.97% | 1.14% | |
| CAD | -0.10% | -0.21% | -0.30% | -1.11% | -0.33% | -0.13% | 0.02% | |
| AUD | 0.21% | 0.08% | 0.00% | -0.78% | 0.33% | 0.20% | 0.35% | |
| NZD | 0.01% | -0.11% | -0.17% | -0.97% | 0.13% | -0.20% | 0.17% | |
| CHF | -0.15% | -0.24% | -0.32% | -1.14% | -0.02% | -0.35% | -0.17% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
- Silver holds firm as the US Dollar eases, but rising Fed rate hike bets keep the metal on track for a weekly loss.
- XAG/USD remains stuck in a tight range as narrow Bollinger Bands point to subdued volatility.
- RSI stays near neutral, while weak ADX and a slightly negative MACD suggest limited directional momentum.
Silver (XAG/USD) holds firm on Friday, supported by a modest pullback in the US Dollar (USD) after its strong weekly rally. At the time of writing, Silver trades around $64.30 but remains on track for a weekly loss.
The softer US Dollar offers some relief, although the upside remains limited as markets raise bets on another Federal Reserve (Fed) rate hike after last week’s 25-basis-point (bps) increase. Higher borrowing costs weigh on non-yielding assets such as Silver and increase the appeal of interest-bearing assets. US Treasury yields climbed to fresh multi-year highs this week.
The CME FedWatch Tool shows around a 66% probability of another rate increase at the October meeting. Next week’s US Personal Consumption Expenditures (PCE) inflation report, ISM Manufacturing Purchasing Managers’ Index (PMI) and Nonfarm Payrolls (NFP) data could influence those expectations.
Despite the fundamental headwinds, Silver’s technical picture looks somewhat constructive. Momentum indicators are largely neutral, suggesting that neither buyers nor sellers are in firm control as XAG/USD continues to move within a range established over the past month.
Technical analysis
On the daily chart, Silver remains in a consolidation phase, with price moving between the contracted Bollinger Bands. The narrow band spread points to subdued volatility and suggests that a clearer directional move may require a breakout from the current range.
The Relative Strength Index (RSI) at 47 hovers around the midline, hinting at balanced momentum, while the Moving Average Convergence Divergence (MACD) stays slightly negative, suggesting modest downside pressure within an overall range as trend strength, per the Average Directional Index (ADX) at 10, remains weak.
On the topside, initial resistance is located at the Bollinger middle band near $65, followed by the upper band at $67, before more significant overhead supply emerges at the horizontal barriers of $70 and $75.
On the downside, immediate support is seen at the Bollinger lower band around $62, ahead of the horizontal floors at $60 and then $55, where buyers would be expected to reassert themselves if the current consolidation breaks lower.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- Gold rebounds from $4,254 as Oil drops over 3%.
- Softer Dollar offers relief despite 10-year yield above 5%.
- Fed hike bets remain elevated as inflation expectations climb.
Gold (XAU/USD) price holds firm on Friday after two days of losses, as US bond yields remain high and inflationary concerns mount, increasing the likelihood of further tightening by the Federal Reserve (Fed) and other major central banks. The XAU/USD pair trades at $4,280 after reaching a low of $4,254.
XAU/USD stabilizes as easing crude offsets stubbornly high Treasury yields
The yellow metal recovered some ground as Oil prices edged lower amid progress in US-Iran negotiations, with CBS reporting that conversations moved to a detailed technical phase and sources in Tehran describing the atmosphere as positive. However, a Senior Iranian official confirmed that the Strait of Hormuz will remain closed and that conditions for nuclear talks between both parties have not been met.
Despite this, West Texas Intermediate (WTI) is down over 3% to $91.00 per barrel. At the same time, the US Dollar Index (DXY), which tracks the buck’s performance against a basket of six currencies, is down 0.22% at 101.02.
The US 10-year Treasury yield edged down nearly 2 basis points to 5.192% on Friday, even though traders increased bets that the Federal Reserve will continue to tighten monetary policy.
Data-wise, the US economic schedule featured core Durable Goods Orders rising above estimates in August, while July data was upwardly revised, indicating robust business spending.
Recently, the University of Michigan Consumer Sentiment Index for September fell to a four-month low of 48.1 in September, down from August’s 51.7. Rising inflationary concerns continued to erode households' purchasing power. Consequently, Americans revised inflation expectations for one year upward to 4.6% from 4%, and for a five to ten-year period, ticked up from 3.3% to 3.4%.
This week, Fed speak provided a leg lower for Gold and elevated the probability of a rate hike at the October meeting. Prime Terminal shows 64% odds, and for the December meeting, the rate is nearly 93%.
XAU/USD technical analysis: Gold recovers, but stays below $4,300
Price action indicates that Gold bias remains tilted to the downside, despite showing signs of life. XAU/USD trades subdued within a ‘bullish wedge’ pattern, and a failure to decisively clear the 100- and 50-day SMAs, roughly $4,304-$4,312, caps the yellow metal's recovery above $4,300.
Momentum shows that Gold's bearish outlook persists, with the Relative Strength Index (RSI) remaining below the 50 neutral mark. Thus, the most likely direction is downward.
For a bearish continuation, XAU/USD needs to break below the ‘bullish wedge' bottom, around $4,200-$4,210. Doing so would invalidate the pattern and open the path to test the August 3 low of $4,019, with the $4,000 mark in sight.
On the upside, initial resistance for Gold is at $4,300, near the SMAs convergence area, followed by $4,350. The next key level is $4,400.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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