Gold climbs back above $4,000 as hopes rise for easing US‑Iran tensions

Gold pares some losses, trading close to $4,010 during early Asian trade on Tuesday.
Gold finds some support as investors hope for a reduction in hostilities between the US and Iran.
An unchanged interest rate decision is likely when the Fed meets on Wednesday for its October meeting.

Gold price (XAU/USD) recovers to about $4,010 in early Asian trading on Tuesday, ending a two-day run of losses. The modest advance comes as softer oil prices ease inflation worries ahead of the US Federal Reserve (Fed) meeting this week.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Hopes that hostilities between the US and Iran will subside have sent oil prices sharply lower. According to CNBC, Saudi Arabia’s Defense Minister met Iranian leaders in Tehran on Monday to try to defuse simmering tensions between the two countries. Inflation worries eased somewhat following the development, although that relief could be short-lived.

Bob Haberkorn, senior market strategist at StoneX, said: “There’s been a bit of a pullback in crude oil, which is helping gold, while some bargain-hunting is also coming in,” adding: “I think it’s going to be light trading here and we’re going to hang around the $4,000 level into the Fed announcement to see what they have to say,”

Wednesday’s Fed interest rate decision will be the main focus for markets. Following September’s hike, the US central bank is widely expected to retain the 3.75% to 4.00% interest rate range at its forthcoming October meeting.

According to the CME FedWatch tool, markets currently assign around a 10% probability to another quarter-point Fed rate increase at Wednesday’s meeting. At least one hike before year-end is expected by nearly 82.3%.

Can gold’s bull case withstand CTA shorts near the key $4,000 level?

TD Securities describes the challenge as follows: “the long-term gold bull thesis faces a test near the $4,000/oz level, with CTAs now short across all signals.” As prices test this important threshold, positioning remains tilted towards the downside. The bank observes that “CTAs have already been heavy sellers in gold, with systematic funds firing short across all momentum indicators,”

Even so, TD Securities highlights the market’s resilience: “spot and futures pricing has traded below the key $4,000/oz level, however the market has again shown signs of being extremely resilient with prices recovering in fairly short order.” The bank also notes that “despite the near-term easing of ETF flows, the trend remains supportive, while central bank demand has been a key upside driver, particularly when prices are within this territory.”

A sustained rise above $4,092/oz could prompt short-covering and potentially strengthen the backdrop, which remains broadly favourable for gold. On positioning, TD Securities explains that “CTAs would start to cover shorts north of $4,092/oz,”

What do Warsh’s investment and AI remarks signal without a Fed policy commitment?

A slightly less impactful tone emerges from Fed Chair Warsh’s speech, which registers 5.6/10 on the FXS Speechtracker against a historical average of 6.1/10, even as the overall messaging remains broadly consistent. Warsh’s admission of being “over-scarred from the global financial crisis” points to caution, alongside his emphasis on structural growth and an investment surge fuelled by “good policies,”. He declined to prejudge the forthcoming October and December meetings, while underlining the spillovers between US policy and the rest of the world. By presenting AI both as a near-term source of demand and as a means of improving confidence in data, and by stressing financial stability and tail risks, Warsh maintained a risk-conscious approach. The emphasis favours continued policy vigilance rather than an immediate change in the Fed’s reaction function.

Markets’ perception of the policy stance remained firmly hawkish after the speech: the FXS Fed Sentiment Index recorded a 0.00-point change and held at 127.51. Taken together, the unchanged, elevated index and the marginally lower FXS Speechtracker score suggest that markets see no meaningful adjustment to the Fed’s hawkish bias. Warsh’s caution, along with his investment and AI focus, is being viewed as compatible with a continued preference for tight conditions.

Technical Analysis: Does gold’s position below the 100-day SMA keep the outlook negative?

Despite the latest consolidation, the daily chart points to a bullish near-term bias for XAU/USD. Spot prices remain comfortably above both the 100-day simple moving average (SMA) and the 20-day Bollinger middle band, preserving the broader uptrend. Trading above the lower Bollinger band also suggests a cushion against declines. Meanwhile, the Relative Strength Index (RSI), at 35.20, is edging towards oversold territory, indicating that selling pressure could be fading rather than signalling a reversal in trend.

The lower Bollinger band at $4,020 marks the immediate support area, followed by the Bollinger midline around $4,130 and the 100-day SMA at $4,220. Together, these levels form a closely packed demand zone supporting the bullish structure. The current set of indicators identifies no nearby resistance. Provided daily closes hold above the $4,020 technical floor, a recovery from this support zone could allow buyers to try to regain control and move towards recent highs.

(The technical analysis of this story was written with the help of an AI tool. Learn more.)

Common questions about gold

What makes gold an investment choice?

Widely used to preserve value and facilitate exchange, gold has held an important place throughout human history. Beyond its lustre and use in jewellery, the precious metal is now commonly regarded as a safe-haven asset, or an investment considered attractive during periods of turmoil. It is also widely viewed as protection against inflation and currency depreciation, since its value does not depend on a particular issuer or government.

Which buyers hold the most gold?

The largest holders of gold are central banks. To help support their currencies during turbulent periods, they often diversify their reserves by purchasing gold, strengthening perceptions of both the economy and the currency. Substantial gold reserves can bolster confidence in a country’s solvency. World Gold Council data show that central banks increased their reserves by 1,136 tonnes in 2022, with those gold purchases valued at around $70 billion. No other year since records began has seen purchases this high. Emerging-economy central banks, including those in China, India and Turkey, are rapidly expanding their gold reserves.

How does gold move relative to other assets?

Both the US Dollar and US Treasuries, major reserve and safe-haven assets, tend to move inversely to gold. A fall in the Dollar typically supports gold, giving investors and central banks scope to diversify their holdings during uncertain periods. Gold’s relationship with risk assets is also inverse: rising equity markets generally weigh on its price, whereas selling in riskier markets tends to benefit the precious metal.

Which factors influence gold prices?

Several factors can drive changes in gold prices. Its safe-haven appeal means geopolitical turmoil or concerns over a severe recession can trigger a rapid rise. Because gold offers no yield, lower interest rates tend to support it, while higher borrowing costs usually weigh on the metal. Nevertheless, the behaviour of the US Dollar (USD) accounts for most price movements, as gold is quoted in dollars (XAU/USD). Dollar strength generally restrains gold prices; a weaker Dollar, by contrast, is likely to lift them.

Gold climbs back above $4,000 as hopes rise for easing US‑Iran tensions

Can gold’s bull case withstand CTA shorts near the key $4,000 level?

What do Warsh’s investment and AI remarks signal without a Fed policy commitment?

Technical Analysis: Does gold’s position below the 100-day SMA keep the outlook negative?