Gold (XAU) Forecast: Fed Uncertainty and Geopolitics Keep Prices Rangebound

Gold Prices Rise in Choppy Trading as Markets Weigh Fed Outlook and Geopolitical Tensions

Spot gold prices edged higher on Tuesday, moving within the established trading range of $2685.64 to $2624.78. While investor indecision continues to define the current price action, a break above $2685.64 could reaffirm the uptrend and lead to an acceleration in gold’s ascent if backed by stronger buying volume.

On the downside, the immediate support lies at the minor pivot of $2616.25. Failure to hold this level may drive gold prices down to the next key level at $2578.25.

At 11:17 GMT, XAU/USD is trading $2647.41, up $4.825 or +0.18%.

Gold Supported by Weaker USD and Treasury Yields

A softer U.S. Dollar and declining Treasury yields have provided some support to gold. The yield on the 10-year Treasury note dropped marginally to 4.02%, reversing from its recent peak above 4% on Monday. This decline comes despite strong labor market data, which initially pushed yields higher and pressured gold. The 2-year Treasury yield also moved down, falling by 3.5 basis points to 3.969%.

Investors are now focused on fresh insights from Federal Reserve policymakers, with Fed Governor Adriana Kugler highlighting that the U.S. labor market remains resilient despite some cooling. The Fed aims to prevent a sharp slowdown in employment, which could dampen growth expectations further. Meanwhile, the CME FedWatch tool suggests that market participants are no longer pricing in a 50-basis-point rate cut at the Fed’s upcoming November meeting, with the odds now favoring a 25-basis-point reduction.

Geopolitical Tensions and Physical Gold Demand Impact Prices

Geopolitical risks, particularly ongoing tensions in the Middle East, continue to underpin safe-haven demand for gold. Israel’s recent expansion of ground operations into southwest Lebanon has added to market uncertainty, keeping a floor under gold prices as investors seek protection from potential global disruptions.

In China, gold demand remains subdued, with the country’s central bank refraining from increasing its gold reserves for the fifth consecutive month. Shanghai gold prices are still trading at a discount compared to London benchmarks, signaling weak physical demand in the world’s largest gold-consuming market. The post-Golden Week holiday session saw gold prices in China register their worst performance since 2017, contradicting earlier reports of increased consumer buying.

Gold Market Forecast

The near-term outlook for gold remains uncertain but slightly bullish as long as prices hold above $2616.25. A breakout above $2685.64 could spark further gains, especially if the U.S. Dollar weakens and Treasury yields continue to decline.

However, any failure to maintain support levels could trigger a bearish move, pushing prices toward $2578.25. Traders should remain cautious, watching for signals from the Federal Reserve and further geopolitical developments.