XAU/USD rebounds firmly as China Treasuries-buying report smashes US yields

• Gold stages a solid comeback from weekly lows, retakes $4,150 early Thursday.
• US Dollar declines sharply alongside Treasury yields on China’s bond-buying report.
• Technically, the daily RSI remains bearish and a headwind for Gold buyers.

Gold is building on the previous rebound from one-week lows of $4,073, accelerating its recovery momentum beyond $4,100 in Asia on Thursday. The upswing is likely to continue ahead of the US Retail Sales and Producer Price Index (PPI) data.

Early Thursday, Gold has entirely reversed steep losses incurred following the release of hot US Consumer Price Index (CPI) report on Wednesday.

The US Labor Department's Bureau of Labor Statistics said ​on Wednesday that annual core CPI rose 2.6% last month after climbing 2.4% in August, above market forecasts of +2.5%. Core CPI inflation steadied at 0.3% over the month in September, beating estimates of 0.2%.

The odds for an October Federal Reserve (Fed) interest rate hike jumped to 42% post-hot inflation data, up ​from about 22% before the release, according to the CME Group’s FedWatch Tool.

The shift in Fed expectations lifted the US Dollar (USD) and US Treasury bond yields across the curve, triggering a sharp sell-off in non-yielding Gold to the tune of about 1.5%.

However, Gold buyers appear to be rescued by a Bloomberg report released earlier, citing that China is quietly piling on US Treasuries through non-US custodians, inflating Canada’s holdings to nearly $600 billion.

Meanwhile, escalating Middle East conflict and artificial intelligence (AI) investments-led debt concerns boost safe-haven flows, aiding Gold’s recovery.

Further, no urgency on rate hikes shown by some of the Fed officials recently helps push back against expectations of an imminent rate lift-off, supporting Gold optimists.

Looking ahead, it remains to be seen whether Gold sustains the rebound once again from sub-$4.100 levels as the US Retail Sales and PPI inflation data could offer fresh clues on the Fed’s rate hike path.

Also, traders may turn cautious and refrain from placing fresh bets on Gold ahead of Fed Chairman Kevin Warsh’s appearance on Friday.

Warsh is scheduled to participate in a conversation with IMF Managing Director Kristalina Georgieva at the Fireside Chat with International Monetary Fund Managing Director Kristalina Georgieva in Bangkok, Thailand.

It will be Warsh’s last public appearance before the Fed enters the ‘blackout period’ on Saturday, ahead of the October 27-28 monetary policy meeting.

In the daily chart, XAU/USD trades at $4,145.23, keeping a bearish near-term tone as spot holds below all major simple moving averages (SMAs). The 21-day SMA at $4,208.09, the 100-day SMA at $4,245.61 and the 50-day SMA near $4,334.44 align overhead as a layered resistance band, while the 200-day SMA at $4,523.59 reinforces the idea of a broader topside cap. The Relative Strength Index (14) around 43.12 sits in neutral-to-soft territory, hinting that downside pressure persists but without outright oversold conditions.

On the downside, initial structural support is seen toward the broken upward trend-line zone, with the break level at $4,002.10 followed by its origin near $3,990.07. On the topside, bulls would need to reclaim the 21-day SMA at $4,208.09 first, before challenging the 100-day SMA at $4,245.61; a sustained move above these would open the way toward the denser resistance around the 50-day SMA at $4,334.44, while only a recovery above the 200-day SMA at $4,523.59 would significantly weaken the prevailing bearish bias.