Gold Catches a Bid Off a 2-Month Low

Gold climbed on Friday to a one-week high, extending its rebound from Wednesday's two-month low.

The bounce has taken spot gold back towards $4,200 an ounce as the dollar's rally stalled and Treasury yields eased off this week's highs. It is the first real sign of life since the metal peaked near $4,700 in late August, although the rate-driven sell-off that followed still hangs over the market.

Latest Market Moves

• Gold rose as much as 1.5% to around $4,200 an ounce in early Friday trade, having dropped to $4,066 on Wednesday, its lowest level in two months.

• Silver gained around 1.9% to just above $60 an ounce, while Platinum jumped more than 3%, although both were still on course for weekly losses heading into the US open.

• The US 10-year Treasury yield had steadied around 5.25% by Friday morning, below the 24-year high it hit on Wednesday.

• Brent crude dipped to around $103.50 a barrel after President Trump said the US would not attack Iran before next month's midterm elections, easing inflation worries.

• EUR/USD hovered around 1.12, close to this week's 17-month low, with the dollar holding near its strongest level in 18 months despite pausing for breath.

Fed Minutes Take October Off the Table

Wednesday's Fed minutes were hawkish on paper, but markets took comfort in what they implied about timing.

All 19 policymakers backed September's rate hike, and most saw another increase as appropriate before year-end. Traders now price less than a 20% chance of a move at this month's meeting, according to the CME FedWatch tool, pushing the next hike out to December, where the odds sit above 80%.

That reprieve has been enough to cap the dollar and pull yields back, lowering the opportunity cost of holding gold, which pays no interest. Fed officials are not backing down, though, with St. Louis Fed President Alberto Musalem saying on Thursday that rates will need to rise again, so next week's US CPI release could decide whether the October breathing room holds.

A Hedge Against a Stretched Stock Market

Gold's bounce comes as cracks start to appear in the AI trade that has carried equities to lofty levels.

The S&P 500 is sitting close to 7,800, just shy of Tuesday's peak, even with long-term borrowing costs back at multi-decade highs. Chip stocks came under pressure on Thursday after Reuters reported that OpenAI's annualised September revenue was almost $50bn, below earlier signals, while SpaceX, Broadcom and Oracle are all lining up multi-billion-dollar fundraising to buy AI chips.

With valuations rich and capital getting more expensive, investors have been looking for protection beyond bonds, which have been battered by this year's global sell-off. Gold ETFs pulled in $10bn of inflows in September, equivalent to 67 tonnes, even as the price fell 8.5% over the month.

Central Banks Are Still Buying

Beneath the price swings, official sector demand has not gone away.

China's central bank added 21 tonnes of gold to its reserves in September, its 23rd straight month of buying and the largest monthly increase in three years, taking its holdings to 2,196 tonnes. Chinese consumer gold imports also hit a record 1,141 tonnes in the first eight months of the year, despite higher prices.

That steady demand helped cushion September's slide, when rising yields and futures traders cutting their positions overwhelmed physical buying. Geopolitics remains in the background too, with Iran stepping up attacks on tankers in the Strait of Hormuz this week even as Washington talks up diplomacy.

Gold Breaks Its Downtrend Line

On the 8-hour chart, gold has pushed through the trendline that has capped every rally since the late-August peak.

The metal slid from near $4,700 to a two-month low of $4,066 on Wednesday, briefly breaking below support around $4,110 that had held since late September. That break failed almost immediately, and the swift recovery back above support has the hallmarks of a bear trap, flushing out late sellers before the bounce.

RSI has been making higher lows since late September even as price retested the lows, a bullish divergence that pointed to fading downside momentum, and it now sits around 53. $4,200 is the immediate hurdle while holding above the broken trendline would put the $4,300 area, where late-September rallies stalled, in focus, while a drop back below the trendline would reopen this week's low.

Source: SpreadEx | Gold, 8-Hour Chart