Gold prices experienced a volatile session last Friday, initially surging to $4260 per ounce before retreating sharply to close below $4200 at $4196.03. The fluctuation reflects a tug-of-war between expectations of Fed rate cuts and rising U.S. Treasury yields.

Market participants widely anticipate a 25-basis-point rate cut by the Federal Reserve this week, marking the third consecutive easing move. However, divisions are growing over the future policy path. While softer U.S. economic data and dovish Fed commentary have supported gold, stronger-than-expected inflation and surging Treasury yields have capped gains. The 10-year Treasury yield climbed 3.1 bps to 4.139%, its highest in over two weeks, reflecting cautious positioning ahead of the Fed meeting.

Physical demand from key markets like India and China has weakened recently as buyers await price pullbacks, adding downward pressure. Analysts remain divided on gold's near-term direction, with 46% bullish, 46% neutral, and only 8% bearish in a survey of 13 experts. Retail investors show stronger optimism, with 69% expecting gains.

The dollar index edged down 0.07% to 98.98, extending its weekly decline to 0.5% as markets priced in an 87.2% probability of a December rate cut. Some analysts warn the dovish expectations may be overdone, noting the Fed could signal a slower easing pace through its updated "dot plot" projections.

This week's Fed decision takes center stage, with particular focus on the policy statement, economic projections, and Chair Powell's press conference. Any shift toward fewer anticipated rate cuts in 2025-2026 could be interpreted as hawkish, potentially boosting yields and the dollar while pressuring gold. Conversely, maintaining or increasing projected cuts would likely support gold prices.

As of Monday's Asian session, spot gold traded narrowly around $4202.5/oz as investors awaited clearer signals from the Fed. The metal's near-term trajectory will hinge on whether the central bank's messaging leans more dovish or hawkish than current market pricing.