Gold recovers above $4,130 as oil eases ahead of Fed decision

• Having rebounded from $4,106, Gold rises 0.15% to $4,132.
• Oil prices ease as the US permits the unloading of blocked cargoes.
• The probability of an October Fed rate rise holds at 14%, versus 89% for December.

US approval for cargo to be unloaded from some blocked vessels has pushed oil prices lower on Wednesday, with Gold (XAU/USD) making modest gains as oil markets retreat. Following a rebound from the session low of $4,106, XAU/USD stands at $4,133 at the time of writing, a gain of 0.25%.

XAU/USD rebounds with support from softer oil prices and stable Treasury yields

An improvement in market sentiment is limiting bullion’s gains, even as developments in the US-Iran war continue. According to newswires, Pakistani Army chief Asim Munir held talks with Iranian officials in Tehran and presented a “compromise proposal,” while N12 news reported that he conveyed the US “final warning” to Tehran. This meant attacks could resume if Iran failed to agree to a peace deal.

According to Al Hadath, Iran’s Secretary of the Supreme National Security Council, Mohsen Rezaei, told Munir that Iran explicitly rejected the American demands.

There was more encouraging news on the Russia-Ukraine war: the Kremlin agreed that Abu Dhabi may host a fresh round of trilateral talks between the United States, Russia and Ukraine.

With little on the US economic calendar, market participants are taking their cue from US equities. Shares have extended their gains, led by a surge in technology stocks fuelled by enthusiasm over AI.

Gold is drawing support from stable US Treasury yields. The benchmark US 10-year note yields 5.111%, unchanged, while the US dollar records marginal losses.

At 101.67, the US Dollar Index (DXY) is 0.05% lower. The index tracks the dollar against a basket of six currencies.

The outlook for Federal Reserve (Fed) policy is also a factor behind Gold’s rise. According to Prime Terminal, markets assign a 14% probability to a 25-basis-point rate increase in October, while the likelihood of a December rise remains elevated at nearly 89%.

Attention is turning towards next week’s Fed meeting and the publication of the Core Personal Consumption Expenditures (PCE) Price Index, the US central bank’s preferred inflation measure.

Before then, this week’s focus is on US Initial Jobless Claims and the University of Michigan Consumer Sentiment reading for October.

XAU/USD technical analysis: Gold remains rangebound near $4,100-$4,200

For a sixteenth consecutive day, Gold remains within the $4,100-$4,200 trading range. Although there is no clear directional bias, its decline of nearly 26% from the record high near $5,600 points to a medium-term downtrend.

The Relative Strength Index (RSI) signals bearish momentum, although it is edging upwards. That mixed signal suggests a further period of consolidation.

The bias for XAU/USD therefore remains to the downside, with initial support at $4,100. A break below this level would bring the 14 October low of $4,073 into view, immediately followed by the 29 July cycle low of $3,996. Further down, support lies at the 17 July low of $3,959 and the year-to-date (YTD) low of $3,941.

A bullish reversal would require XAU/USD to contend with resistance at $4,200, followed by the 100-day Simple Moving Average (SMA) at $4,235, the 50-day SMA at $4,316 and then $4,500.