Gold (XAU/USD) and silver (XAG/USD) prices edged higher during Asian trading on Wednesday, supported by a retreating US Dollar and heightened geopolitical tensions in the Middle East, as traders awaited the release of the US Consumer Price Index (CPI) data for September [1][3]. Gold held above $4,150, with technical support seen just above the 78.6% Fibonacci retracement at $4,115, while silver traded around $59.20 per troy ounce after two days of losses [1][3].
The US Dollar Index (DXY) slipped 0.1% to near 102.10, retreating from its yearly high of 102.61 posted on Monday, as 10-year US Treasury yields corrected to around 5.20% from a recent multi-decade high of 5.36% [2]. The CME FedWatch Tool indicated that traders assign a nearly 90% probability of a Federal Reserve rate hike at the December policy meeting, with a 77-88% chance that rates will remain unchanged at the upcoming meeting this month [1][3]. This sentiment was reinforced by recent hawkish comments from FOMC members, including New York Fed President John Williams, who stated that one more rate hike may be appropriate this year but does not foresee additional increases in 2027 [3].
Market participants are closely watching the US CPI release, with consensus estimates pointing to headline inflation rising 3.6% year-over-year in September (up from 3.4% in August) and core CPI increasing to 2.5% (from 2.4%) [2][3]. Analysts at Societe Generale expect the Fed's policy outlook to remain largely unchanged even if core CPI rises to 2.5% [2]. Meanwhile, the Euro (EUR/USD) extended its recovery to near 1.1210, buoyed by the softer US Dollar, but upside is seen as limited due to French fiscal risks and expectations that the European Central Bank will keep rates unchanged at 2.50% this month, as forecast by 70 of 73 economists in a Reuters poll [2].
Geopolitical risks continued to underpin precious metals, as oil prices climbed to a nearly two-week high amid escalating conflicts between Iran-allied Houthis and Saudi Arabia, with attacks on energy infrastructure and ongoing tensions in the Strait of Hormuz [1][3]. TD Securities noted that 'strength across the energy market is hard to shake as tanker attacks escalate,' supporting robust oil prices [3]. The IMF also warned of significant risks to global economic growth and financial stability, citing threats from a potential slowdown in AI investment, rising debt, and prolonged Middle East conflict [3].
Technical analysis for both gold and silver suggests a bearish near-term tone, with gold consolidating in a range after a recent drop and silver trading below key moving averages, though both metals are finding support from the current macroeconomic and geopolitical backdrop [1][3].
CONCLUSION
Gold and silver prices are holding firm as traders await key US inflation data and weigh the likelihood of a December Fed rate hike amid persistent geopolitical tensions. While technicals remain bearish, the retreating US Dollar and elevated energy prices are providing support. The market remains cautious, with upcoming US CPI data and central bank decisions likely to set the next direction for precious metals and major currency pairs.