Gold Market Drivers
US 10-year Treasury yields closed lower again, despite an initial rebound following three consecutive sessions of pressure. This morning, however, Treasury yields opened with a downward gap, while gold moved in the opposite direction, opening higher. The US dollar also weakened at the start of the session, extending the losses recorded over the previous two trading days last week.
Kevin Warsh’s remarks during a dialogue session with the IMF director on Friday offered few clues about the Federal Reserve’s policy direction ahead of its October 27–28 meeting. With limited US economic data scheduled this week, aside from the services and manufacturing PMI reports due on Friday, Treasury yields are likely to remain a key driver of gold prices. Oil prices will also attract attention as traders assess the latest developments in the Middle East.
Oil Volatility and Fed Rate Hike Bets
After climbing to around $101 per barrel on Friday evening, oil prices opened lower on Monday. Two factors contributed to the decline: President Donald Trump’s decision to lift sanctions and tariffs on Russian energy, and the latest futures contract opening below the previous contract’s closing price.
Nevertheless, oil prices are expected to remain volatile as geopolitical conditions continue to shift. Trump’s executive orders easing sanctions and tariffs on Russian energy have drawn bipartisan criticism. However, Trump stated on social media that the measures were intended to keep Russia engaged in peace negotiations with Ukraine.
For now, the policy shift is viewed as a potential counterbalance to renewed tensions in the Strait of Hormuz.
Over the weekend, Iran’s Islamic Revolutionary Guard Corps (IRGC) Navy reportedly said that an oil tanker had exploded after striking a naval mine in the southern part of the Strait of Hormuz, citing Iranian media reports.
Another development that could ease market concerns is the possibility of Pakistan’s army chief visiting Iran this week. The prospect has raised hopes for continued diplomatic efforts between the United States and Iran.
However, reports about preparations for potential US strikes against Iran dominated headlines throughout last week. Trump did not rule out military action and reportedly raised the possibility of using a MOAB (Mother of All Bombs) against Iran. Nevertheless, he also signaled that an attack might not take place before the November 3 midterm elections, offering some temporary relief to geopolitical tensions.
Meanwhile, market expectations for a Federal Reserve rate hike next week have continued to decline. As of Monday morning during the Asian session, the CME FedWatch Tool showed a 14.9% probability of a rate hike on October 28, down from 16.1% previously.
With few major US economic releases scheduled this week and the Federal Reserve entering its blackout period, during which officials refrain from commenting on monetary policy, interest rate expectations may remain relatively stable.
However, a further escalation in geopolitical tensions could push oil prices higher, reigniting inflation concerns and potentially strengthening expectations for another Fed rate hike.
US Economic Data and Treasury Yields in Focus
Other US economic releases are unlikely to have a significant impact on market expectations for Federal Reserve policy. Among this week’s scheduled reports, the US services and manufacturing PMI data due on Friday could have some influence on gold prices, although the figures may not directly change interest rate expectations.
Beyond economic data and geopolitical developments, US Treasury yields are likely to play a crucial role in determining gold’s direction this week.
If Treasury yields continue to decline, gold could extend its recovery as lower yields reduce the opportunity cost of holding a non-yielding asset. Conversely, a rebound in yields could put renewed pressure on gold prices and prompt traders to reconsider their strategies, potentially shifting toward selling opportunities.
Geopolitical developments will also require close attention, particularly tensions involving Saudi Arabia and the Iran-backed Houthi group, US-Iran relations, and the ongoing Russia-Ukraine conflict.
Two scenarios could shape gold’s near-term outlook:
Diplomatic progress and de-escalation: Intensified negotiations or mediation efforts could reduce geopolitical tensions and ease pressure on energy prices. Lower oil prices could subsequently moderate inflation concerns and reduce expectations for further Fed tightening. This scenario would generally be supportive of gold.
Further geopolitical escalation: Renewed hostilities could drive oil prices higher and revive concerns about persistent inflation. Such developments could strengthen expectations for tighter Federal Reserve policy, potentially weighing on gold prices.
Gold Technical Analysis: Doji Signals Indecision
On the daily chart, gold formed a doji candlestick resembling a spinning-top pattern. Technically, this formation reflects market indecision, with neither buyers nor sellers establishing clear dominance.
The next directional move will depend largely on the following candlestick’s closing price relative to the previous session’s trading range.
A bullish close above Friday’s high of $4,199 would strengthen the case for further upside and suggest that buyers are regaining control. Conversely, a bearish close below Friday’s low of $4,147 would increase downside risks and indicate that selling pressure is gaining momentum.
Until a clearer technical signal emerges, gold may remain sensitive to changes in Treasury yields and geopolitical headlines.
With limited economic data scheduled for Monday, traders are likely to focus on developments outside the traditional economic calendar. For now, the US 10-year Treasury yield and geopolitical risks remain the two key indicators to monitor as the gold market searches for its next catalyst.