Why is Gold rebounding towards $4,000 as Iran peace hopes drag Oil and the US Dollar lower?

Gold gains more than 2% to $3,954 as US Dollar selling gathers pace.
A decline of nearly six basis points takes US 10-year Treasury yields to 4.871%.
The probability of a December Fed rate hike remains close to 75% despite firmer US manufacturing activity.

Gold (XAU/USD) is recovering strongly on Monday, climbing more than 2% as softer crude prices weigh on the US Dollar (USD). The Dollar’s positive correlation with crude reflects the inflationary pressure from elevated energy prices. At the time of writing, XAU/USD is trading at $3,954.

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

Are lower energy prices and Treasury yields driving renewed demand for XAU/USD?

Growing speculation about a diplomatic resolution to the US-Iran conflict has sent oil prices sharply lower. According to reports, Iran’s supreme leader gave President Masoud Pezeshkian “certain authorities” concerning peace negotiations. Risk appetite improved following news that US President Donald Trump favours a peaceful resolution, putting pressure on the Greenback. The US currency typically benefits from high interest rates and its appeal as a safe haven.

At 101.68, the US Dollar Index (DXY) is trading 0.27% lower against its basket of six currencies. US Treasury yields have softened as well: the 10-year yield has fallen nearly 6 basis points to 4.871%.

October’s Institute for Supply Management (ISM) Purchasing Managers’ Index (PMI) in the US rose to 55.5 from 54.5, beating the forecast of 54.6. Within the report, the Prices Paid sub-component eased to 75.2 from 77.9, while the employment measure also weakened during the month.

Traders have scaled back their hawkish bets compared with a week earlier, despite business activity posting its second-highest reading in more than four years and signalling solid economic expansion. According to the CME FedWatch Tool, money markets now assign a 75% probability to a December rate hike, compared with 80% a week ago.

Which US events are traders watching?

Tuesday’s US midterm elections are in focus for traders, alongside Factory Orders, the Job Openings and Labor Turnover Survey (JOLTS), and addresses by Federal Reserve officials.

XAU/USD technical outlook: Is reclaiming $3,900 enough to complete the recovery?

Gold’s trend remains upward following its rebound from yearly lows, while the Relative Strength Index (RSI) indicates that buyers are building momentum. From below $3,900, XAU/USD has recovered to current spot levels. However, it still trades beneath the most recent cycle low of $3,975, the October 23 low of the day (LOD), which now acts as resistance.

A completed bullish reversal requires buyers to clear the October 23 LOD and then the psychological $4,000 mark. Above $4,000, the next hurdle would be a key resistance trendline around $4,050-$4,070, followed by $4,100.

A continuation of the bearish move would require a break below $3,900. That would bring the October 30 yearly low of $3,870 into view, with the next support at $3,500, the former daily high recorded on April 22, 2025.

Gold: frequently asked questions

What attracts investors to Gold?

Throughout human history, Gold has held an important place as both a store of value and a medium of exchange. Beyond its lustre and use in jewellery, the precious metal is now widely regarded as a safe-haven asset, or an investment considered attractive during periods of turmoil. Its independence from any particular issuer or government also underpins its widespread use as a hedge against inflation and currency depreciation.

Which buyers hold the largest Gold reserves?

The largest holders of Gold are central banks. To support their currencies during unsettled periods, they typically diversify reserves and purchase Gold, helping strengthen perceptions of both the economy and its currency. Substantial Gold reserves can reinforce confidence in a country’s solvency. World Gold Council data show that central banks increased their reserves by 1,136 tonnes in 2022, worth approximately $70 billion. That marked the largest annual purchase since records began. Emerging-economy central banks, including those in China, India and Turkey, are rapidly building their Gold reserves.

How does Gold move relative to other assets?

An inverse relationship links Gold with the US Dollar and US Treasuries, both of which are major reserve and safe-haven assets. A weaker Dollar generally supports Gold, allowing investors and central banks to diversify their holdings when markets are turbulent. Gold also tends to move in the opposite direction to risk assets: rising equity markets usually weigh on its price, whereas selling in riskier markets generally supports the precious metal.

Which factors influence Gold prices?

A broad range of influences can drive Gold prices. Its safe-haven appeal means geopolitical instability or concerns about a deep recession can trigger a rapid rise. Since Gold offers no yield, lower interest rates generally support it, while higher borrowing costs typically weigh on the metal. Nevertheless, movements in the US Dollar (USD) account for much of its price behaviour because Gold is quoted in dollars (XAU/USD). Dollar strength tends to restrain Gold prices; a weaker Dollar, by contrast, is likely to lift them.