Gold is looking to wrap September down consolidates the monthly losses, the heaviest since June. Today session may be made for yellow metal struggling to remain in neutral territory. The yellow metal bounces off low as traders remain cautious over the key challenges to sentiment and also rising U.S. Treasury yields continued to apply pressure. The two-punch combination of surging U.S. Treasury yields and a higher U.S. dollar is pressuring gold down amid inflationary fears and risk-off sentiment in the marketplace, according to analysts.  Last night, spot gold prices hit a fresh low that has not been seen since early August.

Gold is a dollar-dominated asset type; So prices are correlated with US dollar and the US economic trends. Yield and the dollar are an important part of it. There is an inverse correlation between high yield and metals. As yields increase, metals decrease and USD rises. Yesterday, the US dollar index also rose slightly. Today is the last trading day of September, but gold traders are not optimistic about the metal price range for the upcoming month of October.

Currently, the rise of the dollar is triggered by recent reports from the Federal Reserve that they are going to paralyze their unprecedented accommodation monetary policy. Fed’s accommodation monetary policy is a key component of the economic recovery that has begun in the United States. However, there are real costs to Fed’s $ 120 billion monthly acquisitions. The Reserve Bank’s balance sheet now stands at $ 8.4 trillion. Although it is not clear when the Federal Reserve will lower their balance sheet, they have announced that they will “soon” begin to reduce their monthly accumulation.

Since the Federal Reserve announced that they will begin to taper their monthly $120 billion of asset purchases the yields in U.S. debt instruments rise dramatically.   This strength is a direct result of higher yields in government bonds and notes resulting in the dollar again be favored as a safe-haven asset. After the Fed Chair Jerome Powell signaled that tapering could begin in November and end by the middle of next year, all the near-term risk-off sentiment has gone to benefit the U.S. dollar and not gold, as per kitco report.

Headlines about moving China, Evergrande and secondary data Fedspeak can delight gold traders. However, much attention will be paid to the US Senate’s report on the infrastructure spending bill and the debt ceiling extension. If policymakers can deal with the problem, gold recovery moves can be made.

XAU/USD 4 Hour Chart:

Support: 1716.5 (S1), 1707.0 (S2), 1692.5 (S3).

Resistance: 1740.6 (R1), 1755.1 (R2), 1764.6 (R3).

Amidst these above catalysts the yellow metal is on sideways ahead of Fed’s speech and Higher yields. We expect mid-trend for XAU/USD.