Gold (XAU/USD) extended losses in early European trading on Tuesday, sliding towards $3,900 as firmer US data reinforced expectations of further Federal Reserve tightening. US manufacturing activity expanded for a 10th consecutive month in October, with the ISM Manufacturing PMI rising to 55.5 from 54.5, beating forecasts. That backdrop, alongside a modest uptick in US bond yields, reduced demand for the non-yielding metal. The US Dollar struggled for traction as markets waited for US midterm elections; prediction markets favour Democrats taking both the House of Representatives and the Senate, while a Republican sweep is framed as a larger surprise that could push up Treasury yields and the dollar. Separate comments pointed to intensified mediation contacts aimed at ending the US-Iran war, though talks have yet to deliver a breakthrough.
Negotiations involving Qatari mediators failed despite Tehran proposing to reopen the Strait of Hormuz for two days if US conditions are met, while renewed Russia-Ukraine tensions kept geopolitical risk premia in focus. Traders are also watching US JOLTS Job Openings data, with Friday’s Nonfarm Payrolls report as the main macro event. Technically, XAU/USD stayed below the 100-period EMA on the four-hour chart, with RSI near 40.0 and attention on support around $3,870; resistance sits at the 100-period EMA near $4,053, with MACD mildly positive.
Bearish Gold Outlook As Macro And Policy Risks Dominate
We recommend leaning into a cautious bearish stance on Gold (XAU/USD) derivatives over the coming weeks as strong US data supports higher yield expectations. The October ISM Manufacturing PMI expanding to 55.5 from 54.5 highlights underlying economic strength that keeps the Federal Reserve inclined toward tighter policy. Historically, manufacturing PMI readings consistently above 55 drive US Treasury yields higher, which places direct downward pressure on non-yielding assets like gold.
Managing Risk Amid Election And Geopolitical Volatility
With the upcoming US midterm elections and volatile geopolitical developments, we should prepare for sharp price swings by utilizing defined-risk derivative structures such as put options. While prediction markets heavily favor a split or Democratic Congress, an unexpected election outcome could instantly trigger a rally in the US Dollar and bond yields. Additionally, ongoing friction surrounding the Strait of Hormuz and Eastern Europe means sharp geopolitical headlines can create sudden, temporary price bounces.
From a technical standpoint, we should focus on the key support zone around $3,870, where a decisive breach would likely open the door for deeper losses. Derivative traders should keep tight risk management in place as long as prices trade below the 100-period moving average near $4,053. A confirmed break above that $4,053 resistance level would invalidate the immediate downside setup and force us to pivot toward a neutral or temporary recovery stance.
