Dollar Holds Firm as High Yields Weigh on Gold

Key Takeaways:

*The dollar is firm despite weaker Fed hike expectations. High US Treasury yields and the euro’s decline are supporting it.

*French fiscal concerns are a major FX driver. Pressure on French bonds pushed EUR/USD to a 17-month low and helped lift the Dollar Index.

*Gold’s rebound faded. Reduced odds of an October Fed hike offered support, but the stronger dollar and higher yields weighed more heavily.

Market Summary:

The dollar’s strength is being driven by both US yields and weakness in the euro. On Monday, the Dollar Index reached 102.53, while EUR/USD fell to roughly $1.1160–$1.1161, its lowest since May 2025, before recovering toward $1.12. Investors are demanding a larger premium to hold French government bonds as they assess France’s debt and political gridlock; the French–German 10-year yield spread remained around 145 basis points on Monday after exceeding 150 basis points on Friday. Because the euro has a large weight in the Dollar Index, its decline can lift the index even when the dollar is moving less decisively against other currencies.

This dollar move has persisted despite a sharp reduction in expectations for an October Fed hike following September’s weak payrolls report. At the same time, the US 10-year Treasury yield closed near 5.31% on Monday, and the ISM services survey showed that its input-prices index rose to 74.0, the highest since July 2022. The survey measures prices paid by businesses, rather than consumer inflation, but it helps explain why longer-term yields remain high even as traders expect the Fed to wait this month. That combination supports the dollar for now, while leaving it vulnerable if yields retreat or the euro stabilises.

For gold, these forces are pulling in opposite directions. Lower odds of an immediate Fed hike helped spot gold rise to about $4,152 during Monday’s US morning, but the recovery faded as the dollar and Treasury yields remained firm. Reuters reported spot gold down 0.3% at $4,128.69 an ounce on tueday; US gold futures were little changed at $4,156. The strong dollar raises the metal’s cost for buyers using other currencies, while higher bond yields increase the opportunity cost of holding bullion. The difference between the Monday and Tuesday figures reflects the time of each market snapshot. 

Gold’s support comes from the weaker labour data, fiscal concerns and the possibility of renewed Middle East escalation. Its near-term direction, however, still depends heavily on whether yields and the dollar keep climbing. Wall Street’s technology-led gains on Monday show that higher yields have not yet caused a broad retreat from risk assets, which may also limit immediate safe-haven demand for gold. The next policy clues are the September FOMC minutes on 7 October and US September CPI on 14 October: evidence of persistent inflation could sustain yield pressure, while a softer reading could give gold more room to recover.

Technical Analysis

Gold, H4

Gold remains in a short-term bearish trend with price continuing to trade below the key 4,375.00 resistance after breaking down from the previous consolidation structure. The latest price is around 4,130.00, with sellers maintaining control after the rejection near 4,300–4,320 and the subsequent decline toward the 4,100.00 support area.

Momentum indicators continue to favor the bears, although selling pressure has started to stabilize. The RSI is around 42 below its moving average and below the neutral 50 level, indicating that bearish momentum remains dominant without yet reaching oversold territory. Meanwhile, the MACD remains bearish below the signal line, while the histogram is slightly negative. This confirms that downside momentum is still present, although the relatively small histogram suggests that the latest selling pressure is not accelerating strongly. Overall, the near-term outlook remains bearish.

Resistance Levels: 4160.50, 4190.00

Support Levels: 4110.00, 4100.00