Market Drivers
The US bond market reopened on Tuesday following the Columbus Day holiday on Monday. So far, the bond market has shown little reaction to the escalation in geopolitical tensions over the weekend. As a result, US 10-year Treasury yields have continued to move lower since the start of the Asian session.
The decline in Treasury yields has been accompanied by a temporary weakening of the US Dollar during Asian trading, allowing Gold prices to withstand early-session selling pressure and rebound toward the $4,185 area.
The US Dollar strengthened briefly at the start of Monday's trading session, putting pressure on Gold prices through the New York session. Another headwind came from hawkish comments by Cleveland Fed President Beth Hammack. However, with the US bond market closed for the holiday, Gold's trading range remained relatively limited throughout the day.
Hammack Maintains Hawkish Stance
Cleveland Fed President Beth Hammack remained in focus following her comments on monetary policy, particularly in the absence of major US economic data releases overnight. Her remarks carried a hawkish tone, with Hammack maintaining that additional monetary tightening could be necessary and expressing concern that inflation expectations might begin to become less anchored.
Hammack argued that a higher neutral interest rate suggests current monetary policy may not be sufficiently restrictive to slow economic activity. She added that interest rates might need to rise further to curb demand and bring inflation down from its current range of approximately 2.5% to 3.0%.
Against this backdrop, Hammack said she remained open to the possibility of another interest rate increase following September's hike. She hopes tighter monetary policy will help cool corporate investment and wealth-driven consumption without pushing the unemployment rate above 4.2%.
One of Hammack's key concerns is that inflation psychology may be becoming entrenched. She pointed to investment pressures associated with artificial intelligence (AI), which could spread beyond data centers to other sectors of the economy.
Markets currently expect the Federal Reserve to leave interest rates unchanged in October. However, Wednesday's US Consumer Price Index (CPI) report could provide further clarity on whether the Fed will maintain its current policy stance or consider additional rate increases.
Gold Technical Analysis
Daily Chart: Bearish Candlestick Signals Caution
The daily Gold candlestick closed bearish, resembling a shooting star, with its upper wick slightly longer than its lower wick. The pattern emerged after the rally stalled at $4,217, with prices failing to establish a higher high throughout the session.
At the same time, downside pressure was contained around the $4,154 area, in line with expectations, before Gold rebounded to close near $4,171.
From a technical perspective, this candlestick formation suggests that a short-term downside correction or potential reversal remains possible.
Escalating geopolitical tensions between the Houthi group and Saudi Arabia have pushed oil prices higher, raising concerns that the reopening of the US bond market could trigger a rise in Treasury yields as investors respond to geopolitical risks. Higher yields would typically weigh on non-yielding Gold.
However, Treasury yields were moving lower at the time of writing, allowing Gold to recover from its initial Asian-session weakness. After rebounding from the $4,150 area, prices climbed toward $4,180.
For now, $4,217 represents the key psychological resistance level, while $4,150 serves as psychological support. The direction of Treasury yields remains an important factor in determining whether Gold can extend its recovery or face renewed selling pressure.
H4 Chart: Correction Retests Support
On the four-hour (H4) chart, the decline into Tuesday morning remains consistent with the expected corrective move toward the brown zone between $4,136 and $4,169.
This correction followed Gold's breakout above the falling wedge resistance at $4,159 on Friday. The breakout triggered a rally toward the green zone between $4,202 and $4,254, although the advance stalled at a temporary high of $4,217.
Gold subsequently retreated, forming a swing low overnight that extended into Tuesday morning.
Technically, the current price action remains consistent with a potential retest of support or the previous swing low as part of a normal corrective phase following the breakout.
The $4,136–$4,169 zone remains an important area to monitor. If Gold can hold above this region, the broader recovery structure could remain intact. However, a decisive break below the zone would increase the risk of further downside correction.
Overall, Gold's near-term direction will depend on the interaction between US Treasury yields, the US Dollar, incoming inflation data, and geopolitical developments. A sustained decline in yields could support another recovery attempt, while renewed yield strength could limit gains and bring the $4,150 support area back into focus.