Gold Outlook: Treasury Yields, Oil Prices and AI Earnings — Three Key Drivers for Gold

Gold remained caught between bullish and bearish forces last week. Stronger-than-expected US inflation data and persistently high oil prices heightened concerns about sticky inflation, weighing on gold prices. However, falling US Treasury yields and rising safe-haven demand amid a pullback in tech stocks subsequently supported gold and helped it rebound.

With relatively few top-tier economic releases this week, markets will turn their attention to US tech earnings while continuing to monitor interest rate expectations and geopolitical developments. Any unexpected developments across these three key factors could influence gold’s next move.

Technical observation: A breakout is needed, with both ends of the range in focus

Over the past week, gold has largely traded within the $4,100–$4,200 range. A break beyond either boundary would be an important step towards ending the current consolidation.

For bulls, $4,200 is a key short-term level that gold needs to reclaim and hold above. A sustained close above this level could extend the rebound, bringing $4,235 and $4,300 into focus. Conversely, if another attempt to move higher is rejected, attention will turn to $4,100–$4,110 and last week’s low near $4,073.

Inflation surprises to the upside as the Fed maintains a cautious tone

US inflation and expectations for Fed policy remain the key variables driving gold’s price action.

Last week, both US CPI and PPI came in above consensus. The data also showed that, beyond rising energy costs, some goods and services prices were facing additional pressure. Following the releases, market expectations for a Fed rate hike increased significantly.

However, some Fed officials subsequently indicated that there was no need to rush into further policy tightening. This prompted markets to reassess the likelihood of an October rate hike, with the probability falling back to around 13%. This dovish repricing in rate expectations provided some marginal support for non-yielding gold.

That said, a 25bp rate hike by year-end remains almost fully priced in, while the probability of another hike in January is approaching 40%. This suggests that markets are merely pushing back the timing of further tightening rather than anticipating the end of the rate-hiking cycle. Interest rate pressures remain in place, limiting gold’s upside.

Meanwhile, concerns about financing risks triggered by the sell-off in AI stocks are also influencing the US dollar and Treasury markets. Investors are questioning whether data centre operators can generate profits in time to service their debt. 

As a result, some safe-haven flows have moved into US Treasuries, pushing yields lower and weighing on the US Dollar Index. Lower yields reduce the opportunity cost of holding gold, providing support for prices.

Falling oil prices offer some relief, but geopolitical risks remain

Geopolitical developments and energy prices remain important drivers of gold.

Since the weekend, Trump has announced temporary exemptions from certain Russia-related energy sanctions and tariffs, prompting expectations that Russian fuel supplies could increase. Combined with US Energy Secretary Chris Wright’s statement that oil flows through the Gulf had recovered to 80% of pre-conflict levels, this has helped push oil prices down from a five-month high.

Iran has also said that its proposal to reopen the Strait of Hormuz within seven days remains valid, adding to hopes that diplomatic efforts could help resolve the dispute. Easing geopolitical tensions and retreating oil prices have provided support for gold bulls.

However, the US and Iran remain divided over issues including port blockades, easing restrictions on oil exports and Iran’s nuclear programme, with negotiations yet to deliver a substantive breakthrough. Attacks on oil tankers and shipping risks around the strait also mean that uncertainty over energy supplies has not fully dissipated.

Oil prices remain sensitive to incoming headlines. Unless prices fall significantly, concerns about inflation and further rate hikes could continue to weigh on gold bulls.

What to watch this week: Oil prices, Treasury yields and AI earnings

Overall, gold remained range-bound over the past week. Sticky US inflation has yet to fully subside, geopolitical risk premiums remain elevated, and rate-hike pricing is limiting gold’s upside. However, the Fed’s generally cautious tone and safe-haven demand amid concerns over the AI trade have provided gold with an opportunity to recover.

US economic data are relatively light this week, while the Fed has entered its blackout period ahead of the next policy meeting, reducing the number of public remarks from officials. Whether oil prices continue to retreat, US Treasury yields fall further, and AI earnings ease concerns about financing and profitability will be the three key factors to watch when assessing gold’s direction this week.

SpaceX is scheduled to report its third-quarter results after the US market close on October 20, followed by Meta and Tesla after the close on October 21. Investors will be looking beyond whether earnings beat expectations to assess whether AI-related revenue is keeping pace with capital expenditure growth and whether these massive investments can translate into sustainable cash flow.

If earnings deepen concerns about AI investment returns and financing pressures, risk assets could remain under pressure. Gold could benefit if safe-haven flows into US Treasuries push yields lower. However, if oil prices strengthen again and inflation concerns drive rate expectations higher, gold’s rebound potential could remain limited.