Gold may test 4,000-mark if oil extends rally; US Fed moves eyed: Kotak Neo

Disclaimer: Views and outlook in this report belong to the brokerages and analysts cited. They do not reflect the views of Business Standard. Readers are advised to exercise discretion. Kaynat Chainwala, AVP Commodity Research of Kotak Neo Gold is trading near $4,115 an ounce, in the lower half of the $4,070 to $4,220 range it has held since early October. Last week's recovery to $4,198 has faded as Brent climbed above $110 a barrel, a five-month high. For a metal that pays no interest, the chain from oil to inflation to Fed policy to yields now drives the price, and it is likely to remain central heading into the Fed’s October 28 policy meeting. Last week showed how sharply that chain can move Gold. September consumer prices rose 3.7 per cent from a year earlier against expectations of 3.6 per cent, and core prices rose 0.3 per cent on the month against a forecast of 0.2 per cent. Gasoline, up 9.1 per cent, explained more than half of the monthly increase, which links the report directly to oil. The dollar index touched 102.9, an 18-month high, the 10-year yield jumped to about 5.3 per cent, and gold fell to $4,073, its lowest since early August. Bets on an October hike rose from about 22 per cent to near 40 per cent within hours. The move began to reverse on Thursday. A sell-off in AI related technology stocks sent money into government bonds, and the 10-year yield fell about 10 basis points to roughly 5.09 per cent, its biggest one-day drop since August last year. The dollar eased and gold gained about 1.6 per cent to $4,176, even though a hotter producer price report came out the same day. Because gold pays no interest, every fall in yields cuts the cost of holding it, and every rise adds to that cost. In the short term this has mattered more to gold than the inflation data itself. Fed Chair Kevin Warsh then gave the recovery a further lift on Friday. At the IMF meetings in Bangkok he refused to say whether the Fed would hike again this month, saying he does not prejudge meetings, and he described the recent rate increases by major central banks, including two by the European Central Bank, as a synchronous tightening. He also called the AI boom an inflation shock. Odds of an October hike fell to about 17 per cent, the dollar index slipped to a weekly low of 102.08, and gold reached its weekly high of $4,198. Although most Fed officials continue to signal that further tightening may be required, they have emphasized the need for additional data and markets now expect the next hike in December. The Fed appears to be postponing, rather than abandoning, further tightening, which may continue to limit upside potential for gold. Real yields have turned slightly in gold's favour. The 10-year inflation-protected yield has eased below 2.8 per cent from a peak of 2.95 per cent, the highest since 2008, and the dollar index has pulled back from its 18-month high to 101.8. A few sessions are not enough to change the trend, though. Meanwhile, investment demand for gold remains resilient. Gold-backed ETFs recorded net inflows for a 13th consecutive week through mid-October 2026, after more than 70 tonnes were added in September despite an 8 per cent decline in prices. The scale and persistence of these purchases suggest continued participation from institutional investors and sovereign wealth funds rather than retail buyers, whose demand typically weakens during sharp price corrections. Ongoing ETF accumulation reflects a broader strategic allocation theme centered on reserve diversification, concerns over long-term currency debasement and geopolitical fragmentation. This supports the floor near $4,070 but has not been strong enough to lift gold out of its range. Oil remains the main risk. Brent touched a five month high of $112 on Tuesday, as Houthi strikes on Saudi energy sites and at least 18 vessel attacks in two weeks, according to Kpler, kept the risk premium intact. Iran has also said it has no choice but to assert control over the Strait of Hormuz. Higher oil lifts fuel prices and headline inflation, which keeps the Fed leaning towards tightening. This is why West Asia tensions have not helped gold, and why they are likely to stay a hawkish input for it. In the near term, oil and bond yields will drive gold into the Fed's October 28 decision. If Brent extends its rally and feeds into hotter inflation data and firmer Fed hike bets, lifting yields and the dollar, gold could break below $4,073 and test $4,000. If Brent slips below $100 and yields ease on a sustained basis, gold could break above $4,220 and move towards $4,300 to $4,400. Until one of these happens, the current range is likely to hold. Gold futures on the daily chart remain under pressure as prices trade below the short-term moving average and within a broader declining channel visible on the daily chart. The inability to sustain above the 148,540-resistance zone keeps the near-term bias negative, while a decisive break below the key support near 145,850 could accelerate selling towards 143,230 and 140,810. On the upside, recovery attempts are likely to face resistance at 148,540 followed by 151,600. Momentum indicators remain weak, suggesting that rallies may attract fresh selling unless prices close convincingly above the upper boundary of the falling channel.