Gold briefly broke below its $4,110 support level before quickly rebounding, but the bias stays neutral to bearish as rising oil prices tied to US-Iran tensions threaten to push Treasury yields and rate-hike expectations higher. A separate technical read points to the $3,937-$3,942 zone as the real decision area, with the US 10-year yield near 5.3% and the Dollar near an 18-month high still weighing on the metal.
Gold pierced its $4,110 support level with no clear catalyst behind the move, then quickly erased the losses and climbed back above the level. The bias nevertheless remains neutral to bearish given the lack of any meaningful improvement in gold's fundamental picture.
Oil's Iran-driven rise threatens a further gold drop
Oil prices have been steadily climbing after a report from The Atlantic said the White House asked the Pentagon to develop military options for strikes against Iranian targets, potentially before the midterm elections. The Pentagon has also reportedly instructed US Central Command to complete preparations for potentially resuming major combat operations, according to Axios, though no final decision has been made yet.
If the escalation risks persist, Treasury yields could extend their gains while rate hike expectations strengthen, pressuring gold further. Should the situation not de-escalate soon, another flush lower in gold is possible; but a more dovish Fed could pull real yields down and put a floor under prices.
Yields and the dollar remain the bigger headwind
Away from the Iran headlines, the US 10-year yield has met strong demand near 5.3% and is approaching its own 5.413%-5.420% resistance cluster, a dynamic that has mattered more for gold recently than the inflation-hedge narrative. Fed officials still see inflation risks tilted to the upside from energy costs, AI-related investment and possible tariff increases, though most left the timing of the next hike open, saying another increase would likely be appropriate by year-end rather than committing to October. The Dollar also remains near an 18-month high, leaving gold squeezed between elevated real yields and a firm greenback.
Key levels traders are watching
On the daily chart, a pullback into the major downward trendline could draw sellers positioning for a drop toward 3,885. A break higher, meanwhile, would open the way for buyers to target 4,400 and then 4,700. Separately, a wave-count read flags the 3,937-3,942 zone as the real decision area, where the decline's projection target overlaps the July low, rather than the psychological $4,000 level itself.
Markets now turn to comments from the Federal Reserve's Waller and the latest US jobless claims figures for the next directional cue on rate hike expectations.
Sources: InvestingLive, ActionForex
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