Investors have settled on the timing of Fed rate hikes, while employment data close to forecasts may help XAU/USD, even though the environment remains unfavorable for gold. Let’s discuss this topic and outline a trading plan.
The article covers the following subjects:
Major Takeaways
- In September, gold posted its steepest decline since June.
- Lower odds of Fed rate hikes are helping XAU/USD.
- Rising ETF demand is supporting the precious metal.
- A breakout above $4,200 per ounce would be a reason to buy gold.
Weekly Fundamental Forecast for Gold
The drop in the probability of a Fed rate hike from 73% to 28% has given gold a much-needed breather. The precious metal has faced an extremely challenging environment, with the US dollar strengthening, US Treasury yields reaching their highest levels since 2002, and Brent hovering near $100 per barrel. XAU/USD fell 6% in September, its worst performance since June. In both cases, the Fed helped the bears.
Gold traditionally struggles at the start of a Fed monetary tightening cycle. The futures market expects the federal funds rate to rise from the current 4% to 4.75–5% over the next 12 months. Combined with a strong US economy, elevated energy prices, and competition for resources from hyperscalers, this is driving Treasury yields to 24-year highs. Bond yields in other countries are also rising, putting significant pressure on the non-yielding precious metal.
Bond Yield Performance
Source: Wall Street Journal.
Gold has historically been sensitive to movements in the US dollar and Treasury yields. In 2026, amid the Middle East crisis, oil prices have also become an important driver of gold. Bank of America, for example, links its XAU/USD forecast directly to Brent prices. If the North Sea benchmark rises to $150 per barrel amid a major escalation in the geopolitical conflict, the precious metal could fall to $3,500 per ounce in 2027. Gold risks dropping below $4,000 as early as the fourth quarter if oil continues to trade at current levels.
Clearly, oil affects both the US dollar, as the currency of an oil-exporting country, and Treasury yields. Moreover, the Fed is concerned not only about crude oil but also about refined petroleum products. Because of transportation disruptions in the Gulf, severely damaged infrastructure, and the armed conflict between Russia and Ukraine, diesel and gasoline prices are rising faster than Brent.
Gold Prices and ETF Holdings
Source: Bloomberg.
Gold could have fallen much further without demand for the physical asset. ETF holdings increased in September despite the decline in XAU/USD. Buyers remain concerned about US fiscal problems and continue to bet on the debasement trade. Moreover, Donald Trump has renewed pressure on the Fed, saying that if he were in Kevin Warsh’s place, he would have voted against a September rate hike.
Weekly Trading Plan for Gold
The market has settled on the timing of the resumption of monetary tightening, and US employment data could provide a reason to buy gold above $4,200 per ounce. However, the rally potential appears limited due to the extremely unfavorable environment for XAU/USD.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAUUSD in real time mode
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