Gold holds steady near $4,000 amid firm US Dollar and rising yields

LONDON (October 31) Gold (XAU/USD) treads water on Friday, struggling to extend Thursday’s advance as investors reassess the Federal Reserve’s (Fed) monetary policy outlook following this week’s interest rate cut. At the time of writing, XAU/USD is trading around $4,010, little changed on the day and poised for a second straight weekly loss.

A firmer US Dollar (USD) and steady Treasury yields are capping upside attempts in Gold, as traders scale back expectations of another rate cut this year. In his post-meeting remarks, Fed Chair Jerome Powell downplayed the likelihood of a December rate cut, saying it was “not a foregone conclusion” and emphasizing that policy decisions will remain data-dependent.

Improved market sentiment is also weighing on Bullion’s safe-haven appeal after the much-anticipated meeting between US President Donald Trump and Chinese President Xi Jinping concluded with positive outcomes. The discussion offered some temporary relief following the recent escalation in trade tensions.

Against this backdrop, Gold’s near-term outlook appears neutral to slightly bearish. However, the broader uptrend remains constructive, with long-term drivers such as central bank demand and geopolitical uncertainty still intact despite the recent correction.

Market movers: Markets weigh Fed outlook, ongoing US shutdown

• The US Dollar Index (DXY), which measures the Greenback’s strength against six major peers, is holding firm around 99.50 after surging to a three-month high on Thursday. Meanwhile, Treasury yields continue to edge higher across the curve, with the benchmark 10-year yield climbing nearly 30 basis points since Wednesday to a three-week high near 4.10%.
• According to the CME FedWatch tool, market expectations for a December rate cut have dropped sharply over the past week. The probability of a 25-basis-point reduction has fallen from around 91.7% a week ago to roughly 66.8% at present, reflecting a shift toward a more cautious outlook following Chair Jerome Powell’s recent comments.
• On Thursday, US President Donald Trump and Chinese President Xi Jinping met on the sidelines of the APEC Summit in South Korea and agreed to a one-year trade truce until November 2026. Under the deal, the United States (US) will halve its fentanyl-related tariff to 10%, while China will remove its 10-15% retaliatory duties on various US agricultural products and delay the implementation of rare-earth export controls announced earlier this month.
• The US government shutdown has now entered its fifth week, with no breakthrough after the Senate adjourned on Thursday. Senators are scheduled to reconvene on Monday, but talks remain stalled despite President Donald Trump's urging Republicans to end the filibuster to push funding bills through. The shutdown is already delaying key US economic data releases and raising concerns over its broader economic impact.
• Looking ahead, next week’s set of US private-sector data, including the ISM Manufacturing Purchasing Managers Index (PMI), JOLTS Job Openings, ADP Employment Change, Challenger Job Cuts, University of Michigan sentiment survey, and the New York Fed’s inflation expectations survey, will provide key insights into the labor market and inflation outlook.

FXStreet