VG Markets Download Now

Gold extends fragile recovery from multi-week low as softer bond yields weigh on USD

FXStreet · 2026-09-17T03:48:20Z
Gold extends fragile recovery from multi-week low as softer bond yields weigh on USD
  • Gold gains some positive traction on Thursday as the USD pauses for a breather.
  • The hawkish Fed and elevated US bond yields could help limit deeper USD losses.
  • Geopolitical risks further favor USD bulls, which should cap the upside for bullion.

Gold (XAU/USD) builds on its intraday ascent through the first half of the European session on Thursday and recovers further from a near six-week low, touched the previous day. A modest pullback in US Treasury bond yields prompts some US Dollar (USD) profit-taking, which, in turn, is seen offering support to the commodity. However, the Federal Reserve's (Fed) hawkish outlook, along with escalating Middle East tensions, should limit deeper losses for the safe-haven Greenback and cap the non-yielding bullion.

The US central bank voted unanimously to raise interest rates for the first time since 2023 at the conclusion of the September policy meeting on Wednesday. The decision was in line with the broader consensus and was accompanied by a more hawkish outlook. In fact, the so-called dot plot revealed that Fed officials expect one more interest rate increase this year. At the post-meeting press conference, Fed Chair Kevin Warsh said that the decision was led by a strengthening US economy, a lack of improvement in summer inflation trends, and geopolitics.

Warsh added that inflation is too high and has been for too long, while underscoring the importance of stabilizing consumer prices to grow the US economy. Furthermore, inflation risks stemming from persistently high energy prices underpin prospects for further tightening by the Fed and remain supportive of elevated US bond yields. In fact, the yield on the benchmark 10-year US Treasury remains close to the 5.0% psychological mark and its highest level since April 2007. This, along with escalating tensions in the Middle East, could underpin the safe-haven USD.

In the latest developments, Iran-backed Houthi rebels said that Saudi aircraft have carried out more than 450 air strikes across Yemen in the past week and claimed that they shot down a Saudi F-15 fighter jet over Marib province. Meanwhile, US President Donald Trump claimed that Iran wants to strike a deal and that the war may be nearing its end. Nevertheless, intensifying fighting between the Houthi group and Saudi Arabia keeps the geopolitical risk premium in play, supporting oil prices. This favors USD bulls, warranting caution before positioning for further gains for the XAU/USD pair.

XAU/USD daily chart

Chart Analysis XAU/USD

Technical Analysis

The precious metal maintains a bearish near-term bias below the $4,315-$4,320 confluence – comprising the 50% retracement of the June-August upswing and the 100-day Simple Moving Average (SMA). The said area should act as a key pivotal point, above which the XAU/USD pair could climb to the 38.2% level near $4,404 and the 23.6% retracement at $4,513 en route to the broader cycle high zone at $4,690.

On the downside, immediate support is seen at the 61.8% Fibonacci retracement at $4,226, followed by the deeper 78.6% level at $4,100 and the structural floor around the prior swing low near $3,940.20. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator stays in negative territory with the line below its signal line and a contracting bearish histogram. The Relative Strength Index (RSI) hovers around 44, hinting at waning downside momentum but not yet challenging the prevailing corrective tone.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.