Trump Delays Iran Attack, Gold Finds Relief Ahead of Weekend
Gold Market Drivers
The US 10-year Treasury yield closed lower for the third consecutive session, with Thursday's decline proving more pronounced than the previous two sessions. The drop helped curb the US Dollar's advance and provided relief for the gold market, with XAU/USD rebounding toward the $4,180 area by Friday afternoon.
US President Donald Trump's statement on Thursday that the United States would not attack Iran before the early-November midterm elections helped ease geopolitical tensions. The announcement pushed Treasury yields lower and supported gold prices, which had faced pressure over the previous week amid rising bond yields and a lack of major economic data releases.
TACO Trade: Trump's Iran Decision Eases Market Tensions
Developments surrounding US-Iran mediation had shown little encouraging progress over the past week. Tensions intensified over the previous three days after reports emerged that the Pentagon had asked US Central Command (CENTCOM) to prepare for a potential military strike against Iran.
At the time, Trump indicated that he did not expect an agreement with Tehran and was considering military action before the US midterm elections.
However, the situation shifted on Thursday. The Pentagon had reportedly developed several options for a short, intensive three-day military operation against Iran, targeting missile and drone capabilities, state facilities, and Islamic Revolutionary Guard Corps (IRGC) command centers. Senior officials had also discussed the plans at Camp David the previous Friday, while military commanders reportedly stood ready to act within days if the president changed his policy.
More recent reports indicated that Trump had vetoed five proposals for major operations against Iran or Houthi forces over the preceding months. He subsequently stated that the United States would not attack Iran before the midterm elections.
The announcement helped ease geopolitical concerns and pushed oil prices lower during the Asian trading session. For now, markets appear to be paying greater attention to Trump's latest statements than to reports of military preparations.
The shift reflects what traders commonly call the “TACO trade,” a market reaction in which investors anticipate that aggressive political threats may ultimately be postponed, softened, or reversed. Such developments can trigger a repricing of risk-sensitive assets, including gold, oil, and the US Dollar.
Michigan Consumer Sentiment and Inflation Expectations in Focus
The US economic calendar is centered on the University of Michigan Consumer Sentiment Index and inflation expectations due later on Friday.
Stronger-than-expected readings could put gold under renewed pressure by supporting the US Dollar and Treasury yields. Conversely, softer data could help extend gold's recovery by easing concerns about persistent inflation and the outlook for Federal Reserve policy.
Nevertheless, market reactions may remain relatively limited as investors focus on the upcoming US Consumer Price Index (CPI) report scheduled for October 14.
Ahead of Columbus Day on Monday, the US bond market is scheduled to close for the holiday. The absence of Treasury trading could temporarily reduce pressure from the bond market, potentially allowing gold to consolidate after a week of rising yields.
This environment may provide room for traders to unwind some of the tension created by the recent bond market sell-off, offering additional short-term support for gold.
Gold Price Forecast: Daily Chart Signals a Potential Recovery
The daily candlestick chart closed bullish, while the latest two candles appear to be forming a potential bullish harami pattern. In technical analysis, this formation can signal a possible reversal following a decline, although confirmation from subsequent price action is still required.
Despite the improving technical picture, the bullish outlook remains fragile. Gold needs to break decisively above $4,227 to strengthen the recovery scenario.
If XAU/USD fails to overcome this resistance, selling pressure could return and leave the market vulnerable to another decline.
On the downside, a move below $4,120 would increase the risk of renewed bearish momentum. The more important support zone lies between $4,100 and $4,103. A decisive break below this area could trigger further losses.
For now, Trump's decision to rule out an attack on Iran before the midterm elections has helped calm geopolitical tensions and supported gold's rebound. However, the sustainability of the recovery will depend on price action around key technical levels and the direction of US yields and the Dollar.
XAU/USD H4 Analysis: Falling Wedge Breakout Needs Confirmation
On the four-hour (H4) chart, gold has moved above the $4,149–$4,162 zone and broken through the falling wedge resistance near $4,164.
A falling wedge breakout can signal a potential bullish reversal, suggesting that selling pressure may be weakening. However, the breakout still requires confirmation before it can be considered reliable.
Traders should monitor whether at least two consecutive H4 candles remain above the $4,164 level. Holding above this threshold would strengthen the case for a valid bullish breakout.
Conversely, if the price closes back below $4,160, the move could be classified as a false breakout, raising the risk of renewed selling pressure.
The next three to four hours are therefore important for determining whether gold can sustain its move above resistance or whether the latest recovery will lose momentum.
Key Gold Price Levels to Watch
Resistance: $4,227 — a decisive break is needed to strengthen the bullish outlook.
H4 breakout confirmation: $4,164 — holding above this level would support the falling wedge breakout.
H4 false breakout warning: $4,160 — a close below this level could invalidate the breakout attempt.
Immediate support: $4,120 — a break below this level could revive bearish momentum.
Major support zone: $4,100–$4,103 — a decisive breakdown could open the door to further losses.
Overall, gold is attempting to recover as easing geopolitical tensions and falling Treasury yields provide temporary relief. However, the bullish outlook remains conditional on a sustained breakout above key resistance levels. Until XAU/USD moves convincingly above $4,227, traders should remain alert to the possibility of renewed downside pressure.