First Scenario Fails! Here's the Second Scenario as NFP and Iran War Risks Take Center Stage
Interestingly, US 10-year Treasury yields have remained on a downward trajectory this time, falling further to 4.84%. The decline continued during Friday's Asian session. Meanwhile, the US Dollar, which closed higher on Thursday, extended its rebound during the Asian trading session. This combination added further pressure on Gold, pushing prices down to around $4,039 during early Asian trading.
The latest selling pressure was driven by renewed war concerns after fresh remarks from US President Donald Trump. Although Trump had previously indicated that there were no immediate plans to attack Iran following the US midterm elections, the situation changed dramatically overnight, bringing geopolitical risks back into focus.
Additional pressure also came from concerns over potential liquidity-driven selling to cover losses in the stock market, following another sell-off in the technology sector.
Trump Considers Military Action as Iran Proposes Nuclear Framework
The situation remains uncertain. Trump has acknowledged that several options regarding Iran are under consideration. However, markets have also taken note of comments from US Defense Secretary Pete Hegseth, who suggested that the United States would finish what it had started against Iran.
Washington remains determined to prevent Iran from acquiring nuclear weapons, while Trump believes Tehran has yet to take any steps that would satisfy US demands.
The White House has outlined three possible options currently being considered regarding Iran:
Continue economic pressure: Maintain the blockade of Iranian ports, making it increasingly difficult for Tehran to export its oil.
Escalate military operations: Intensify military action to ensure Iran does not acquire nuclear weapons, potentially leading to renewed war.
Resume diplomatic negotiations: Pursue a peaceful agreement through continued diplomatic engagement.
Among these three options, the possibility of military escalation appears to be receiving greater attention. This marks a departure from the diplomatic approach promoted by Vice President JD Vance over the past several weeks as an effort to end the conflict.
Trump appears to place greater confidence in Hegseth, while earlier rumors surrounding the Defense Secretary's possible dismissal have yet to materialize.
This development could increase the risk of supply disruptions, potentially triggering another surge in oil prices and reigniting inflation concerns. Such a scenario would create additional headwinds for Gold.
Nevertheless, hopes for de-escalation have not completely disappeared.
Following the initial mediation framework developed over the previous weekend and continuing into the period approaching the US midterm elections, Iran has reportedly attempted to submit a nuclear proposal to Qatar based on a two-day framework.
Under the proposal, if Washington accepts the initial conditions involving the lifting of the blockade, exemptions from sanctions agreed upon in June, and the release of frozen funds, Iran would reopen the Strait of Hormuz on the second day.
Tehran would also agree to invite the International Atomic Energy Agency (IAEA) to inspect its nuclear facilities.
If this proposal is accepted, the risk of war could be avoided, geopolitical tensions would ease, and Gold could regain its upward momentum. Economic data would then return to the forefront of market attention, including Friday's NFP report and next week's CPI release.
NFP vs. Geopolitical Risks Heading into the Weekend
If geopolitical developments are temporarily set aside, the US Nonfarm Payrolls (NFP) report would become the primary market catalyst.
However, Friday's early trading suggests that both factors are influencing market sentiment simultaneously: rising expectations for stronger NFP figures and renewed fears of military escalation. This combination has pushed Gold down from $4,106 to around $4,037.
Nevertheless, market conditions could change rapidly, particularly given the volatility expected following the NFP release tonight.
1. NFP: The First Major Catalyst
The October NFP figure is expected to increase from 29,000 to 65,000 jobs.
If employment growth comes in significantly stronger than expected, potentially exceeding 100,000 jobs, Gold could face further selling pressure during Friday's session.
Conversely, if the data comes in weaker than expected, particularly below 55,000 jobs, this could help ease pressure on Gold. Such an outcome may already be partially priced into the market, potentially allowing the precious metal to respond positively following the release.
2. Geopolitical Risks: Two Main Scenarios
For geopolitical developments, we are maintaining the two scenarios used as our primary market reference over the past three days.
Scenario 1: No War or Further Military Escalation
This would represent a calmer environment for financial markets.
Potential Gold reaction:
Gold could resume its upward movement.
A break above $4,150 would strengthen the bullish outlook, opening the way toward $4,217–$4,227 and potentially $4,254.
A successful peace agreement could provide additional momentum, potentially pushing Gold above $4,300.
Strategy: Maintain the BUY scenario.
Scenario 2: The US Launches an Official Attack on Iran
This scenario involves Trump ordering military strikes without prior warning to financial markets, a risk that remains particularly relevant heading into the weekend.
Potential Gold reaction:
Gold could experience a sharp decline, potentially falling below the psychological $4,000 level.
Selling pressure could quickly expose the $3,920 area and the $3,870–$3,886 support zone.
A further break below $3,870 could open the way toward $3,800–$3,820, with an extended downside target of $3,700–$3,720 if the conflict continues throughout the weekend.
Strategy: Immediately switch to SELL if military escalation is confirmed.
Combined NFP and Geopolitical Scenarios
We are also adding four possible combinations of NFP outcomes and geopolitical developments to help guide market positioning.
1. Strong NFP + US Confirms Military Action Against Iran (Military Escalation)
Potential market reaction:
Gold could face double selling pressure from stronger employment data and escalating geopolitical tensions.
Prices could fall further below $3,950.
The $3,870–$3,886 support zone could be tested again and potentially broken.
2. Strong NFP + US Cancels Military Action and Resumes Diplomacy (Military De-escalation)
Potential market reaction:
Gold could initially decline following stronger NFP data.
However, prices could recover later in the evening as diplomatic developments ease geopolitical concerns.
Downside pressure may struggle to push Gold below $3,900, while the $3,940–$3,960 region could provide support.
A subsequent rebound could open the way for Gold to return above the $4,100 area.
3. Weak NFP + US Confirms Military Action Against Iran (Military Escalation)
Potential market reaction:
Gold could initially rise following weaker employment data.
However, gains may remain limited, with prices struggling to break back above $4,100.
Renewed military escalation could subsequently trigger another decline, potentially pushing Gold below $3,960.
More aggressive selling could expose the $3,920 level and potentially lower support areas.
4. Weak NFP + US Cancels Military Action and Returns to Diplomacy (Military De-escalation)
Potential market reaction:
Gold could rise following the NFP release, with further upside momentum supported by easing geopolitical tensions.
A break above $4,106 could open the way toward $4,148.
Under this scenario, Gold could regain its bullish trajectory toward $4,200, with a potential breakout above the $4,217–$4,227 resistance zone.
This would represent the most supportive combination for Gold among the four scenarios outlined above.
Gold Technical Analysis
The daily Gold candlestick closed in a Shooting Star formation after the previous rally stalled around $4,146, which also represents an important daily resistance area.
The failure to sustain upward momentum has revived downside risks, with Gold potentially retesting the $4,000 region or even extending its decline toward $3,960 in the near term. The renewed threat of US military action against Iran following Trump's latest remarks has added to the bearish pressure.
Meanwhile, Friday's NFP report will be the next major challenge for Gold prices.
The early decline could also reflect profit-taking activity and market positioning ahead of the employment report, particularly amid expectations for stronger NFP data and renewed geopolitical uncertainty.
Key technical levels to watch:
Immediate support: $4,020–$4,000.
Next support: $3,955–$3,970.
Key resistance: $4,146–$4,148.
Bullish breakout targets: $4,217–$4,227 and $4,254.
If Gold breaks below the $4,000–$4,020 support region, the $3,955–$3,970 zone becomes the next important downside target.
Conversely, if this support area holds, bullish momentum will need confirmation from weaker-than-expected NFP figures. The bullish outlook would become significantly stronger if Gold manages to climb back above $4,148, particularly if the move is supported by geopolitical de-escalation or a potential US-Iran agreement.
The Bottom Line: Gold is facing two major market catalysts heading into the weekend: US employment data and the risk of renewed military escalation involving Iran. Strong NFP figures combined with a confirmed military attack could trigger substantial downside pressure. However, weaker employment data alongside diplomatic progress could restore Gold's bullish momentum and potentially push prices back above $4,200.