Gold Rises 1.4% Friday as Oil Slips After Trump Says No Iran Strike Before Midterms

Gold bounced on Friday, Oct. 9, after hitting a two-month low on Wednesday. Spot gold gained 1.4% to about $4,190 an ounce, and December futures rose 1.4% to $4,215.30. Gold was headed for a weekly gain.

The trigger was oil. President Donald Trump said Washington will not launch an attack on Iran before the Nov. 3 midterm elections and described the talks to end the conflict as productive. The war began Feb. 28 and has rattled global energy markets since.

Brent crude fell about 1.6% to $102.60 a barrel on Friday. West Texas Intermediate dropped to $90.18. Both are still far above levels that would ease the inflation worry.

Why oil matters to gold

Cheaper oil means less inflation pressure. Less inflation pressure means less reason for the Federal Reserve to keep raising rates. Gold pays no interest, so every rate hike makes it a harder sell.

That chain explains Friday's move. The dollar's rally took a breather, Treasury yields fell for a second straight session, and bullion caught a bid. A weaker dollar also makes gold cheaper for buyers holding other currencies.

Thursday's 30-year Treasury auction drew strong demand, which pushed long-term yields down. The 10-year yield dipped to 5.227% at one point, falling significantly from its previous 24-year high. The 10-year and 30-year yields reached 24-year highs on Monday, Oct. 5.

The Fed is not done talking

The Fed raised its policy rate by a quarter point in September. The vote was unanimous. It was the first hike since 2023, and gold fell 6% that month.

Since then, September jobs data came in softer than expected, with downward revisions to the prior two months. That cut the odds of an October hike. Traders now price a 17% chance of a hike at the Fed's October meeting and an 83% chance of an increase in December, according to CME's FedWatch tool.

St. Louis Fed President Alberto Musalem said the central bank will need to raise rates again to bring inflation back to its 2% target. He declined to say what policymakers should do at the October meeting.

Inflation data gives him some ammunition. The ISM services prices index reached its highest level in more than four years, according to FXStreet.

Analysts see a bounce, not a turn

The people quoted on the move were careful not to call it a reversal.

"This strengthens the case for a Fed hold this month, weighing on the greenback and pulling yields back from their highs, creating prime conditions for a bullion recovery," said Nikos Tzabouras, senior market analyst at Jefferies-owned Tradu.com.

Tzabouras then added the other half. "Macro-geopolitical uncertainty and inflationary pressures persist, markets still expect Fed rate hikes ahead and bond yields remain elevated, keeping the opportunity cost of holding gold uncomfortably high."

Tony Sage, CEO of Critical Metals, said "possible tightening later on could keep gold at risk." He said softer numbers or guidance could push yields to the downside and support gold.

Saxo Bank's head of commodity strategy, Ole Hansen, said earlier this week that gold was trading near key support just above $4,100. He cited rising real yields and dollar strength as headwinds.

Other metals and the supply side

Silver rose 1.5% to $60.22, platinum gained 2.7% to $1,677.80, and palladium climbed 3.3% to $1,159.70.

On the supply side, the Group of Seven agreed to release 100 million barrels of crude oil and/or diesel fuel from reserves. Saudi Arabia cut its November Arab Light price for Asian buyers. Regional oil exports have returned to pre-war levels, though geopolitical risk around the Strait of Hormuz continues.

Debt is a second pressure point. Government borrowing and widening budget deficits in parts of the eurozone are pushing sovereign yields higher. Two European central bankers reaffirmed gold's role as a strategic reserve asset on Monday, but debt concerns can also lift bond yields and limit gold's recovery.

What comes next

The rebound rests on a promise about timing. Trump's pledge covers the period before the Nov. 3 midterms, not after.

The next test is the Fed's Oct. 28 meeting, where markets lean toward holding rates steady. A December increase is priced as the likelier outcome.