Gold is recovering for the second day in a row after falling to a two-month low. At the beginning of the week, XAU/USD dropped to $4,066. By the morning of Friday, October 9, the price returned to the $4,140-4,150 area, reaching a weekly high.
How gold bounced back from the low
On Thursday, the metal closed near $4,130, adding about 0.48% for the day. During the session, the price dropped to $4,103, after which buyers regained the initiative. From the weekly low, the move was about $84 per ounce, or roughly 2%.
Why gold is rising again
One of the main factors was the decline in US government bond yields. At the same time, the dollar retreated from its highest levels in recent months. For gold, this is a favorable combination. The metal does not generate interest income, so lower yields make it relatively more attractive. A weaker dollar also reduces pressure on XAU/USD.
Oil adds geopolitical risk
The situation in the oil market is providing additional support to safe-haven assets. WTI rose by about 2%, to $90.85 per barrel. Intraday gains exceeded 4%. The main factor remains tension around the Strait of Hormuz and risks to energy supplies. Rising oil simultaneously amplifies the geopolitical premium and supports inflation concerns.
Geopolitics supports demand for gold
The market is also watching the situation around Iran. Against the backdrop of tough rhetoric on the nuclear program and persistent tensions, investors continue to factor in the risk of further escalation. During such periods, gold traditionally receives additional demand as a safe-haven asset. But further movement will depend not only on geopolitics, but also on the dollar and US yields.
What is happening with expectations for the Fed rate
The market's main focus is shifting to the December meeting. The probability of a rate hike of 25 basis points in December is estimated at about 81%. At the October 27-28 meeting, the probability of another hike is considered significantly lower. Thus, the market currently allows for a pause in October and another step up later.
What Fed officials are saying
Regulator officials continue to emphasize elevated inflation risks. At the same time, further decisions will depend on new data. Weekly jobless claims came in at 197,000 versus a forecast of 200,000, which did not give the market a strong argument in favor of rapid policy easing.
Where the nearest levels are
The main resistance is around $4,200. Above that is the $4,227-4,231 zone. The nearest support runs around $4,104-4,100. If this zone does not hold, the next target will be $4,000. Below that is the yearly low around $3,941.
What's next
The next important macroeconomic reference point will be the University of Michigan consumer sentiment and inflation expectations index. For gold, the combination of three factors remains critical: US bond yields, dollar dynamics, geopolitical situation. If yields continue to decline and the dollar remains under pressure, gold will get a chance to test $4,200 again.
Did you catch this bounce from $4,066?
A move of $84 per ounce shows how quickly gold can recover after a strong sell-off. But the outcome of a trade depends not only on direction, but also on the available trading nominal. In prop trading, the company provides trading capital after passing a challenge, and the trader works within the established regulations and risk limits. It's better to understand the mechanics in advance, before the next sharp reversal.