Gold rose on Friday, with XAU/USD around $4,182, up 1.20%, after probing $4,200, its highest level in a week. The bounce followed Thursday’s sharp move lower in yields: the benchmark 10-year US Treasury yield fell 11.9 basis points from 5.354% to 5.235%, which took some momentum out of the US Dollar and helped bullion recover after touching two-month lows earlier in the week. The retreat in yields was supported by strong demand at a US 30-year Treasury auction and a pullback in oil after President Donald Trump said the US would not attack Iran before the November midterm elections, following reports of possible renewed strikes.
On Friday, the pressure on the Dollar and yields eased as broader themes stayed in place, including elevated oil prices and expectations of further Federal Reserve tightening. The US Dollar Index traded near 102.22 after rebounding from 101.92, while the 10-year yield held around 5.240% after dipping to roughly 5.219%. Markets see the Fed holding rates at 3.75%-4.00% on 27-28 October, while pricing an 85% probability of a hike in December; inflation expectations data from the University of Michigan are due. Technically, gold remains in a $4,100-$4,200 band, below the 50-day, 100-day and 200-day SMAs, with RSI near 44 and a still-negative but narrowing MACD; resistance is seen at $4,200, then $4,259 and $4,334, with support at $4,100 and then $4,000-$3,950.
Range-Bound Outlook Amid High Yields And Major Resistance
We should prepare for range-bound trading in gold as XAU/USD remains stuck between the $4,100 support and $4,200 resistance levels. With the 10-year US Treasury yield holding high near 5.24%, any upward moves in gold are likely to face strong resistance. We suggest watching these key boundaries closely over the coming weeks to capture short-term swings.
Historically, gold struggles when real yields are high, as seen during the 2022 Fed tightening cycle when gold fell toward $1,600 as yields spiked. Today, with 10-year yields sitting above 5% and the market pricing in an 85% chance of a December rate hike, the cost of holding gold remains heavy. Therefore, we expect rallies toward the 100-day moving average at $4,259 to face heavy selling pressure.
Central Bank Demand, Support Zones, And Trading Ideas
However, we must not ignore the strong price floor created by global central banks, which bought a massive 1,037 tonnes of gold in 2023 alone and have continued strong purchases since. This persistent institutional demand, combined with ongoing geopolitical risks, makes a sudden collapse below the $4,100 level unlikely. We believe this tug-of-war between high interest rates and physical demand will keep the market highly consolidated.
For derivative strategies, we favor selling upside calls near the $4,200 resistance or buying short-term puts on temporary rallies. Alternatively, we can look for buying opportunities closer to the $4,100 support zone, anticipating a bounce back into the current range. Until we see a daily close above the 50-day moving average at $4,334, the broader path of least resistance remains tilted to the downside.
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