Gold Market Drivers
US 10-year Treasury yields initially moved lower before reversing higher in the afternoon. However, the rebound was limited, and yields closed lower again, although the decline was not as steep as the previous day. Meanwhile, the US Dollar (USD) remained broadly weak throughout Wednesday’s trading session. Despite the softer dollar, gold failed to hold its ground or extend its recovery.
Geopolitical developments remained the main obstacle to further gains, with gold’s rebound capped at $4,142 before prices fell back below $4,100 during Thursday’s Asian session.
US and Israel Prepare New Iran Strike Plans
Geopolitical concerns intensified following reports that the US and Israeli militaries had developed specific plans for potential new strikes against Iran after the upcoming US midterm elections on November 3. The New York Times cited US officials and other individuals familiar with the discussions.
The reported targets could include Iranian nuclear facilities, missile and drone storage sites, and energy infrastructure. However, some officials indicated that oil refineries and other oil infrastructure might be avoided to prevent a potential surge in gasoline prices.
Meanwhile, the US military buildup, including the deployment of three aircraft carriers, was reportedly expected to be fully in place by early November.
Nevertheless, it is important to note that plans for potential strikes against Iran have been discussed repeatedly. The Pentagon has presented President Donald Trump with several possible scenarios, while Trump has previously vetoed a return to large-scale hostilities, including earlier this month when both militaries were reportedly preparing for attacks.
Therefore, any proposed US-Israeli military operation would ultimately depend on Trump's decision.
Separately, NBC News reported that US troops and diplomats were being withdrawn or reduced across parts of the Middle East. Citing two US officials, the report described a reduction in the American military presence at US bases throughout the region. The US State Department was also reportedly beginning to order further staff reductions at diplomatic posts.
These measures come amid heightened regional threats and the possibility of US military action against Iran.
The withdrawal of military personnel and diplomats is often interpreted as a sign of rising security risks. Such developments can increase the geopolitical risk premium in crude oil prices, given the Gulf region's critical role in global energy supplies.
Economic Data and Treasury Yields in Focus
On the economic calendar, US Initial Jobless Claims at 19:30 WIB and the Leading Economic Index at 21:00 WIB are the main releases. Initial Jobless Claims are expected to carry greater weight in influencing market movements.
However, neither report is expected to significantly change market expectations for the Federal Reserve's interest rate decision next week. As a result, attention remains focused on US Treasury yields and geopolitical developments.
Treasury yields remain a key indicator for gold's direction throughout this week. If yields resume their decline, gold could regain its upward momentum. Conversely, a renewed rise in yields could push gold lower and prompt traders to shift their strategies toward selling.
Traders should also closely monitor developments across the Middle East, particularly Saudi Arabia, the Houthis, and US-Iran relations, as well as the ongoing Russia-Ukraine conflict.
Any threats to shipping through the Strait of Hormuz or to Saudi energy infrastructure could directly affect physical oil supplies. Confirmation from the Pentagon or the US State Department regarding the scale of troop withdrawals would also help markets determine whether these moves signal an impending escalation or are merely precautionary measures.
Two Key Geopolitical Scenarios for Gold
Traders should pay attention to two potential scenarios that could shape gold's next move.
1. Further Escalation Could Weigh on Gold
An escalation in regional tensions could keep oil prices elevated, reigniting inflation concerns. Higher energy costs could reinforce expectations that the Federal Reserve may need to raise interest rates or maintain restrictive monetary policy for longer.
This scenario would generally be negative for gold, as higher interest rate expectations and rising Treasury yields tend to reduce the appeal of the non-yielding precious metal.
2. Diplomacy Could Trigger a Gold Rebound
Intensified negotiations or mediation efforts could create a path toward de-escalation, easing inflationary pressures and reducing expectations of further Fed tightening.
If Trump rejects the proposed military strike plans or signals a preference for diplomacy, geopolitical tensions could subside. Under this scenario, gold could find room to rebound as concerns over energy supply disruptions and inflation begin to ease.
Gold Technical Analysis
The daily gold candlestick closed in a hammer pattern, but prices have yet to extend their recovery. Gold has been rejected twice at the $4,155 and $4,142 zones over the past two days. At the time of writing, the precious metal was trading below $4,100 during the Asian session.
This price action increases the risk of a breakdown below the $4,066–$4,073 support zone.
If this support area fails, selling pressure could extend toward $4,000 and potentially $3,965. A decisive break below support would strengthen the bearish outlook and expose gold to further downside.
However, if the $4,066–$4,073 zone holds, buying demand could help stabilize prices and trigger another rebound. In that case, the nearest recovery targets are projected around $4,135 and $4,155, although gains may remain limited.
A more substantial recovery would likely require meaningful geopolitical de-escalation or clear signs that the parties involved are prepared to return to the negotiating table.
For now, traders should closely monitor US Treasury yields, developments in the Middle East, and gold's reaction to the $4,066–$4,073 support zone to assess the next potential market direction.