Dollar Holds Near 18-Month High as Gold Rebounds

Key Takeaways:

*The dollar remains near an 18-month high. Elevated Treasury yields and the Fed’s expectation of another possible hike this year support it, although markets see little chance of an October move.

*The yen recovered modestly after Japan’s stronger than expected current-account surplus, bringing USD/JPY near 157.8.

*Gold rebounded after a sharp decline. It recovered to $4,132.66 early Thursday after touching a two-month low Wednesday, as the dollar eased slightly.

Market Summary:

The U.S. dollar remains supported by interest-rate expectations and elevated Treasury yields. The dollar index held around 102.23 early Thursday, near its strongest level in about 18 months, after gaining roughly 0.3% Wednesday. Minutes from the Fed’s September meeting showed unanimous support for the hike to 3.75%–4.00%, with most participants judging another increase likely appropriate by year end. The minutes did not materially change expectations for the next meeting: markets priced only about a 19% chance of an October hike. The New York Fed’s latest survey added to inflation concerns, with one-year household inflation expectations rising to 3.9%. 

The dollar’s strength is also visible in the major currency pairs. EUR/USD traded near $1.12 as rising French borrowing costs revived fiscal concerns, adding euro-specific pressure to the broader effect of U.S. yields. USD/JPY eased to around 157.8 early Thursday after Japan reported a larger than expected current-account surplus. That modest yen recovery shows that dollar strength is not uniform across currencies, even while the U.S.–Japan rate gap and oil costs remain important for the pair. U.S. jobless claims and the ECB’s September meeting accounts are the next scheduled tests for the rate outlook. 

Gold has faced the other side of the yield move. Spot bullion fell to a two-month low Wednesday as the stronger dollar made it more expensive for buyers using other currencies, while higher Treasury yields increased the opportunity cost of holding a non-yielding asset. The 10-year yield reached about 5.36% intraday. Gold then recovered to $4,132.66 an ounce by 0140 GMT Thursday as the dollar eased slightly. Those figures describe a sharp Wednesday decline followed by an early Thursday rebound, rather than one continuous move. 

Underlying demand offers gold some support despite the near-term pressure. China’s central bank added 740,000 ounces to its reserves in September, extending its buying streak to 23 months; the articles you supplied also point to ETF accumulation and continued buying interest from longer-term investors. Those flows may limit sustained weakness, but they have not yet overcome the immediate effect of the dollar and yields. The key question for gold is whether further rises in long-term yields continue to be treated as a reason to hold interest-bearing assets, or increasingly as evidence of fiscal and financial risk that could strengthen demand for bullion.

Technical Analysis

Gold, H4

Gold remains under pressure and is trading around 4,140 after breaking below the 4,220.00 support and forming a series of lower highs within a short-term descending channel. Price is currently attempting to stabilize around the 4,100.00 support, while the recent rebound remains capped by the descending trendline and nearby resistance at 4,150.00–4,180.00.

RSI has recovered to around 48, approaching the neutral 50 level, suggesting that bearish momentum is easing, while MACD remains below the zero line despite the MACD line crossing above the signal line, indicating a potential short-term recovery. From here, a break above 4,180.00 could open the way toward 4,220.00, while a rejection from the descending trendline may bring renewed selling pressure toward 4,100.00 and 4,065.00. Overall, the bias remains cautiously bearish unless gold can break above the descending trendline and reclaim the 4,220.00resistance.

Resistance Levels: 4220.00, 4320.00

Support Levels: 4100.00, 4065.00