The Middle East situation fluctuates again, combined with risk aversion sentiment correction, leading to a sharp rebound in gold. Are the bulls back?

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Source: Huitong Finance

On Wednesday during the Asian session, international gold prices rebounded. XAU/USD rose back to around $4,600. Previously, gold had fallen to about $4,100 at one point, marking a near four-month low, and recording one of the worst weekly performances since the 1980s. This round of volatility reflects the market’s sharp rebalancing between geopolitical risks and macro expectations.

From the news perspective, a market survey shows that the U.S. has released signals of progress in negotiations with Iran, and even terms like “expressions of goodwill” have appeared—somewhat easing concerns that the conflict could continue escalating. However, at the same time, a senior Iranian military adviser said that the conflict will continue until Iran receives adequate compensation. This divergence in information has made market expectations swing; geopolitical risk has not disappeared, but has entered a phase of intensified uncertainty.

Against this backdrop, gold’s appeal as a traditional safe-haven asset has regained some momentum, pushing prices up from the lows. But it’s important to note that this rise is not driven by a single safe-haven factor; it is the result of multiple factors stacking together. On the one hand, the rapid drop in the earlier period caused the market’s technical picture to become clearly oversold, triggering a short-term corrective rebound. On the other hand, risk sentiment has partially improved in stages, and funds have repositioned themselves back into the precious metals market.

However, from a deeper logic standpoint, this current rebound is more a correction of sentiment rather than a trend reversal. The core drivers behind gold’s prior decline were rising interest-rate expectations and higher real yields. The Middle East conflict has pushed up energy prices, thereby reinforcing inflation stickiness and indirectly weakening market expectations for Fed rate cuts. In this environment, as a non–interest-bearing asset, gold’s appeal is suppressed. If inflation pressures driven by war persist, investors may be more inclined to allocate to yield-bearing assets, such as Treasury bonds, rather than gold. This means that the interest-rate path remains the key variable determining gold’s medium-term outlook—not merely geopolitical events. From a capital sentiment perspective, the market is currently in a typical phase dominated by “alternating between risk-taking and safe-haven demand.” Once signals of easing emerge, risk assets rise and gold faces pressure; conversely, if the conflict escalates, safe-haven demand returns and gold prices gain support. Therefore, short-term gold price fluctuations will exhibit high-frequency oscillations rather than a one-way trend. From a technical structure analysis, on a daily timeframe, after gold formed a staged low near $4,100, it rebounded quickly. Overall, however, it is still in a recovery phase within the prior downward trend; while momentum indicators have picked up somewhat, no trend-reversal signal has formed yet. The key resistance near $4,750 is tied to the earlier area of dense trading volume and a zone of trend suppression, making a breakout difficult. Observing the 4-hour timeframe, price shows a typical oversold rebound structure: the swing highs gradually rise, but momentum slows down, indicating that the marginal strength of the rebound is weakening. In the short term, there is clear selling pressure above $4,600. If prices cannot hold firmly, gold may fall again and test support below. $4,300 forms an important support zone; once it breaks, it could reopen downside room.

Overall, gold is more likely to maintain broad-range oscillation within the $4,300–$4,750 band, waiting for new macro driving factors to emerge.

Editor’s Summary

The essence of the current gold rebound is a combination of sentiment repair and a technical rebound, not a trend reversal. While the geopolitical situation is not yet fully clear, safe-haven demand still provides staged support, but what truly determines the medium-term trajectory is the Fed’s interest-rate path and the performance of the U.S. dollar. Until rate-cut expectations clearly improve and the dollar does not show sustained trend weakness, there is limited room for gold to rise sharply. In the future, the market will gradually shift from geopolitical-driven pricing to macro pricing, and the sideways/volatile pattern may continue.

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Editor: Zhu Hunan