Gold slides on Fed rate hike bets and rising yields
XAU/USD analysis
The Federal Reserve pivoted to rate hikes last week and the updated projections showed broad support for another move within the year [1]. Policymakers are grappling with stubbornly high inflation as oil prices remain elevated due to Middle East disruptions, while the AI boom and defence spending exacerbate price pressures. At the same time, the labour market and the broader economy remain resilient as underscored by Tuesday's strong PMIs, leaving ample room for more tightening. A slew of Fed officials have offered hawkish remarks in recent days, including Governor Barr who noted that further moves "are likely to be needed" to bring down inflation [2]. Markets have boosted their expectations, with CME assigning the highest probability of 55% to two hikes by the end of the year. [3]
Higher rate expectations are exacerbating the bond rount. A mix of inflationary pressures, economic growth, ballooning government deficits and competition with corporate debt are pushing US yields higher. This higher rates, higher yields environment raises the opportunity cost of holding non-yielding assets like gold while boosting the USDOLLAR. As a result, XAU/USD extends this month's decline, leaving it exposed to deeper losses and its 2026 low. However, the RSI is approaching oversold territory, which could help contain the selling and give bullion the opportunity to return above the EMA200, which would shift the bias to the upside and allow it to push higher.
Even though deficit fears are pushing yields higher, they are also a source of strength for gold as they erode confidence in the dollar and drive up demand for hard assets. These forces have revived the currency debasement trend that boosted bullion in 2025. Alongside broader de-dollarisation trends and continued central bank buying, the precious metal could extend a strong H2 start. Moreover, it is unclear whether the Fed is willing to go as far as markets price in, while USOIL drops this week on hopes for diplomatic breakthrough.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 24 Sep 2026 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20260916.htm | |
| Retrieved 24 Sep 2026 https://www.federalreserve.gov/newsevents/speech/barr20260923a.htm | |
| Retrieved 24 Sep 2026 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html |
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