07.10.202613:21 Forex Analysis & Reviews: Gold Retreats Under Pressure from Two Factors

The combination of a stronger dollar, higher oil prices, and expectations ahead of the Fed minutes has pushed gold down to its lowest levels since August.

Investors are awaiting the release of the minutes of the September Fed meeting to assess how willing policymakers are to continue tightening monetary policy. ActivTrades notes that the market is reluctant to build large gold positions before greater clarity emerges. CME derivatives indicate that rates are expected to remain unchanged, but the probability of a rate hike in December is estimated at 86%.

Gold and Oil Price Dynamics

The second bearish factor for gold is rising oil prices. Following attacks on tankers in the Strait of Hormuz, shipments fell to 74% of their pre-war level, although alternative routes kept Persian Gulf exports at previous levels. Geopolitical risks are driving Brent prices higher, while expensive oil is reinforcing inflation expectations and expectations of tighter monetary policy, reducing the attractiveness of XAU/USD.

Conflicting signals from the Fed are also putting pressure on the precious metal. Kansas City Fed President Jeffrey Schmid believes that rates should be raised further to contain inflation. San Francisco Fed President Mary Daly says that the decision depends on whether the factors driving prices higher subside.

In September, gold fell by 6% as investors priced in tighter Fed monetary policy and a stronger dollar. This decline toward the $4,000 level stimulated demand from the People's Bank of China, which has been increasing its reserves for 23 consecutive months and added nearly 740,000 ounces in September.

Central bank demand is increasing not only in China, and central banks continue to purchase gold steadily. Bundesbank President Joachim Nagel believes that rising government debt strengthens the case for diversifying reserves. According to a World Gold Council survey, 45% of the 74 central banks surveyed plan to purchase gold in 2026, the highest share since 2018. In August, central banks purchased 39 tonnes, while their purchases since the beginning of the year reached 170 tonnes.

The energy crisis, persistent inflation, and rising bond yields are creating short-term obstacles for XAU/USD. These factors have done little to weaken the precious metals industry's bullish outlook. At the 2026 LBMA conference, participants said that the case for gold is strengthening as central banks diversify their reserves and rising sovereign debt calls into question the role of government bonds as a safe haven. The survey showed that delegates expect gold to reach around $5,013 per ounce within a year, which would be 20% above current levels.

Technically, on the daily XAU/USD chart, the inability of buyers to return to the fair value range of 4170–4440 is a sign of weakness. Nevertheless, a rebound in gold from the pivot levels at $4,070 and $4,010 per ounce provides grounds for buying.