During the European session on Friday (October 9), spot gold rose about 1.5%, essentially erasing all of this week's losses, and was last trading near $4,195 per ounce.
Earlier, Trump said on social media that the United States is holding productive discussions with Tehran and made clear that he will not use military force against Iran before the midterm elections.
After Trump's post, oil prices, real yields, and the dollar all fell in tandem, giving gold room to rebound.
Trump rules out pre-midterm strike on Iran, oil prices, real yields, and the dollar all fall
Gold erased this week's losses after Trump said on social media that the United States is holding productive discussions with Tehran and will not attack Iran before the midterm elections.
The market reacted immediately, unwinding the escalation premium that had built up after reports that Trump was weighing a military strike on Iran before the midterm elections.
After Trump's post, oil prices, real yields, and the dollar all declined, triggering a rebound in gold.
This reaction shows that gold is highly sensitive to changes in geopolitical risk premiums, especially when the risk premium moves at the same time as key drivers such as oil prices, real yields, and the dollar.
Iran's foreign minister says response to U.S. proposal will come within days, positive outcome could shift outlook to bullish
Looking ahead, Iranian Foreign Minister Araghchi said yesterday that Tehran is reviewing Washington's response to Iran's proposal and is expected to reply within the next few days.
A positive outcome could shift gold's outlook from neutral to bullish, as easing geopolitical tensions may further push down oil prices, inflation expectations, and concerns about rate hikes.
However, a negative response would not change much, but it could limit gold's upside.
This statement shows that Iran's reply is a key short-term variable for gold's direction. A positive result could provide additional support for gold, while a negative result could cap gains.
Next week's U.S. CPI report is key, inflation strength will affect Fed expectations
Next week, focus will also turn to the U.S. CPI report.
If the reading is stronger than expected, it could trigger a hawkish repricing of Federal Reserve rate expectations and create fresh pressure on gold.
Conversely, if the reading is softer, it could ease concerns about rate hikes and provide another boost to the precious metal.
This logic shows that CPI data will affect gold through the channel of Fed rate expectations, and inflation strength is one of the core variables determining gold's short-term direction.
Institutional views
Goldman Sachs expects spot gold to rise to $4,900 per ounce by the end of 2026, driven by strong demand from central banks seeking to diversify their foreign exchange reserves.
The bank stressed that central bank gold buying has become a multi-year structural trend, with average monthly purchases significantly higher than levels before 2022, providing solid support for gold prices.
Although short-term Fed policy and rising real yields may slow the rally, Goldman Sachs believes rate hikes will only delay, not end, this gold bull market.
The gradual recovery of private investment demand and demand for hedging against geopolitical and fiscal risks will also further push gold prices higher.
UBS's latest view noted that high short-term real yields and a firm dollar remain headwinds for gold, but medium- to long-term fundamentals are unchanged, and it expects gold prices to regain momentum before the end of the year and continue into 2027.
Specifically, it forecasts $4,600 per ounce in December 2026, $5,000 in March 2027, $5,200 in June, and $5,400 in September.
UBS stressed that central bank gold buying demand, estimated at 750 to 1,000 tonnes for the full year, and the trend toward reserve diversification provide stable support, while concerns about fiscal sustainability will also strengthen gold's role as a strategic hedge asset.
The bank views a price pullback to around $4,000 as an opportunity to increase long-term allocations, rather than a signal to change its bullish logic.
Summary
Gold erased this week's losses as Trump ruled out attacking Iran before the midterm elections, the market unwound the escalation premium, and oil prices, real yields, and the dollar all fell, triggering a rebound in gold.
Iran's foreign minister said a response to the U.S. proposal will come within days. A positive outcome could shift gold's outlook from neutral to bullish, while a negative outcome could limit upside room.
Next week's U.S. CPI report is key. A stronger-than-expected reading could trigger hawkish repricing and weigh on gold, while a weaker-than-expected reading could ease rate hike concerns and support gold.
Going forward, investors need to watch Iran's response, U.S. CPI data, oil price trends, real yields, the dollar, and Fed policy expectations.
If geopolitical tensions ease further and CPI is soft, gold may continue to rise. If CPI is strong or geopolitical tensions heat up again, gold may face pressure.
(Spot gold daily chart, source: Yihuitong)
As of 15:37 Beijing time, spot gold was at $4,194.12 per ounce.