Gold trading reminder: driven by the geopolitical crisis and the Fed’s interest rate cut, the gold price once recovered to 4150. Is the correction over?
2025-10-24 07:19:48
Amidst global economic uncertainty, gold, a traditional safe-haven asset, has once again demonstrated its resilience. This week, after a brief pullback, gold prices rebounded sharply, stabilizing above $4,100. On Thursday (October 23), the price climbed 1.37% to around $4,154 before closing at $4,125.81 per ounce. This rebound was not accidental, but rather the result of a confluence of factors, including investor repositioning ahead of key US inflation data, escalating geopolitical tensions, and the impact of Federal Reserve monetary policy expectations. Despite suffering its largest single-day drop in five years on Tuesday, gold prices remain up 57% for the year, highlighting its position as one of the best-performing assets through 2025. In early Asian trading on Friday (October 24), spot gold prices fluctuated narrowly within a range, currently trading around $4,115 per ounce.
Looking ahead, institutional forecasts show that the gold rally is expected to continue, with the average price potentially reaching $5,055 in 2026, or even higher.
Gold prices staged a significant recovery on Thursday after two consecutive sessions of bearish candlestick patterns, primarily driven by traders taking profits ahead of the release of the September U.S. Consumer Price Index (CPI) report. However, as buyers re-entered the market, gold prices quickly recovered the lost ground, breaking through the $4,100 mark.
The rebound was helped by a subtle improvement in market sentiment, as investors remained vigilant despite some softening of U.S. President Trump's rhetoric on China trade.
Instead, they are turning their attention to Friday's CPI data, which economists expect to see a 3.1% year-over-year increase in the headline CPI and a similarly flat core CPI at 3.1%. This data will directly impact the Federal Reserve's interest rate path. If inflation persists, it could reinforce market expectations for further rate cuts, benefiting non-interest-bearing assets like gold. Furthermore, US existing home sales data for September exceeded expectations, rising 1.5% to 4.06 million units, injecting a sliver of optimism into the market. However, this did not deter gold prices, which instead rose against the trend, demonstrating its safe-haven properties independent of traditional economic indicators.
Geopolitical factors have always been a significant driver of gold price fluctuations, particularly during this recent rebound. The Trump administration's sanctions on Russian oil giants Lukoil and Rosneft in response to the war in Ukraine have reignited demand for safe-haven assets. These sanctions have not only exacerbated tensions in global energy markets but have also indirectly boosted gold's appeal as a hedge against geopolitical risks.
Meanwhile, the White House reportedly plans to restrict software exports from US companies to China in retaliation for China's controls on rare earth exports and port fees imposed on US ships, further escalating Sino-US tech tensions. These intertwined events have fostered a sustained risk-off trend, driving gold's rapid recovery from Tuesday's sharp drop. Although gold prices plummeted nearly 5.5% on Tuesday, from a high of $4,380 to a low of $4,120, and briefly dipped near $4,000 on Wednesday, geopolitical uncertainty quickly brought buying back into the market. It's worth noting that this demand isn't short-term speculation, but rather stems from global central banks diversifying away from the US dollar. For example, the European Central Bank recently announced that gold now accounts for 20% of its reserves, surpassing the euro. This marks a structural shift in gold's role from a purely safe-haven asset to a strategic reserve asset.
The shutdown has lasted 23 days, making it the second-longest in history. If it continues beyond November 4, it will become the longest in history. Given that the Senate will be in recess until October 27, it is almost certain that the US government shutdown will continue into next week.
This shutdown is more worrisome than previous standoffs because it represents a more comprehensive government closure. Disruptions at airports are expected to worsen as air traffic controllers are unable to receive their full salaries, and aid programs that provide food to 42 million low-income people are facing disruption.
Federal workers are missing paychecks, food stamp benefits are at risk and companies await licenses, factors that continue to create perilous economic conditions during the second-longest shutdown in history.
The government shutdown has had a relatively limited impact on the economy so far, but as the impasse enters its fourth week and threatens to become the longest shutdown in history, economists are increasingly concerned that its consequences could become more severe. Some worry that large breaks or cracks could appear in the structure that could harm the economy.
When the shutdown began on October 1st, economists were relatively unconcerned about the economic impact. Based on past experience, they estimated that each shutdown would subtract about 0.1% to 0.2 percentage points from annual GDP growth. However, all of their preliminary estimates mentioned that the economic risks would increase as the shutdown continued.
The Oxford Economics team explained that "there will also be knock-on effects for government contractors, other private businesses, and consumers, and while these consequences are harder to predict, they will cause increasing damage to the economy every week."
Although the US dollar index was blocked from rising again on Thursday, closing at 98.92, up about 0.05%, the US 10-year Treasury yield climbed 4 basis points to 3.997%, and the real yield soared to 1.717%, gold prices still managed to ignore these traditional headwinds and rebounded by nearly 1%, reflecting the market's strong expectations for the Federal Reserve's loose policy.
Currently, investors have priced in a 98% probability of the Fed cutting interest rates by 50 basis points in the remainder of 2025, and nearly 100 basis points in 2026. Since the 1990s, gold has risen an average of 6% within 60 days of the Fed starting a rate-cutting cycle, providing historical support for the current market.
In addition, Morgan Stanley analysts pointed out that gold's strength stems from the Federal Reserve's interest rate cuts, the weakening of the US dollar, and continued buying by central banks and ETFs. The proportion of gold in central bank reserves has exceeded that of US Treasury bonds, the first time since 1996, symbolizing confidence in the long-term value of gold.
Gold ETFs saw a record $26 billion in inflows in the third quarter, bringing their total assets under management to $472 billion. Even retail investors are beginning to join the trend. As expectations of slower US economic growth grow, the depreciation of the dollar will make gold more attractive to international buyers, further fueling demand.
On the other hand, tariff pressure is also quietly affecting the inflation path. Wall Street institutions such as Bank of America and BNP Paribas have warned that tariff transmission will continue to push up commodity prices in the coming quarters, and core service inflation such as medical and transportation will remain stubborn, which may force the Federal Reserve to maintain a loose stance, thereby indirectly benefiting gold.
Many institutions are optimistic about the future trend of gold, which has injected more confidence into the market. JPMorgan Chase predicts that by the fourth quarter of 2026, the average price of gold may reach US$5,055 per ounce, based on investor demand and the assumption that central banks will purchase an average of 566 tons per quarter.
Morgan Stanley raised its 2026 price forecast to $4,400, over $1,000 higher than its previous estimate, suggesting a potential upside of approximately 10% by the end of next year. Analyst Amy Gower emphasized that gold is not only an inflation hedge but also a barometer of central bank policy and geopolitical risks. This forecast is supported by strong inflows into exchange-traded funds (ETFs), diversification of central bank reserves, and an influx of international buyers driven by a weakening dollar.
Despite this, the agency acknowledges potential challenges, such as an unexpectedly strong dollar or smaller-than-expected Federal Reserve rate cuts, which could lead to demand destruction. High prices are already impacting jewelry demand, with second-quarter gold jewelry consumption hitting a 2020 low. Continued weakness in this sector, which accounts for 40% of total consumption, will put pressure on prices. Furthermore, mine supply growth has been limited, averaging only 0.3% annually since 2018. While improved cash flow is prompting some producers to expand projects, environmental permitting, tax uncertainty, and financing constraints are likely to delay new mine development, preventing a capital expenditure supercycle.
From a technical perspective, gold's upward trend resumed on Thursday. Although buyers have yet to conquer Wednesday's high of $4,161, the Relative Strength Index (RSI) shows that buying momentum is accumulating. If gold prices break through $4,200, it will open up space for $4,250, $4,300, and further to the record high of $4,380, and even $4,400.
On the contrary, if it falls back, the first support level is $4100, followed by the October 8 high of $4059. After breaking through, it may test the October 22 low of $4004. This trend echoes the fundamentals, indicating that buyers dominate the market in the short term, but we must be wary of speculative wash-outs, such as this week's sharp fluctuations aimed at clearing out "weak bulls."
At the same time, although the physical shortage in the silver market is independent of gold, it indirectly highlights the overall tight supply and demand of precious metals. 29 million ounces of silver stocks in COMEX warehouses have flowed out in two weeks, and the London market is facing a gap of 100-150 million ounces. This may be transmitted to gold through the arbitrage mechanism, strengthening its structural bull market.
Despite its positive outlook, gold is not a risk-free asset. Morgan Stanley warns that if the Federal Reserve's rate cut path deviates from expectations or the US dollar remains strong, gold could face a pullback. Furthermore, high prices are already triggering signs of demand destruction, with central banks potentially reducing purchases to meet reserve targets, an effect amplified by a weak jewelry market.
While the "physical squeeze" in the silver market hasn't directly affected gold, the reverse flow from the COMEX to London, coupled with opaque inventories of platinum group metals, suggests that the global precious metals delivery system is under pressure. The upcoming US Section 232 review of silver, if designated as a critical mineral, could trigger tariffs or export restrictions, indirectly impacting the pricing of gold as a related asset. In more extreme cases, government intervention could nationalize some supply for use in defense, AI, and energy sectors, amplifying market volatility.
Investors also need to watch for further news on the government shutdown and the situation between Russia and Ukraine, which may increase uncertainty.
Overall, gold's current rebound signals a continuation of its bull market, with geopolitical tensions, expectations of Fed easing, and institutional buying driving prices upward. While short-term volatility is possible, structural demand shifts ensure long-term upside potential. Investors should closely monitor Friday's CPI data and subsequent policy developments.
(Spot gold daily chart, source: Yihuitong)
At 07:18 Beijing time, spot gold was trading at $4114.45 per ounce.
Looking ahead, institutional forecasts show that the gold rally is expected to continue, with the average price potentially reaching $5,055 in 2026, or even higher.
Immediate catalyst for a gold price rebound
Gold prices staged a significant recovery on Thursday after two consecutive sessions of bearish candlestick patterns, primarily driven by traders taking profits ahead of the release of the September U.S. Consumer Price Index (CPI) report. However, as buyers re-entered the market, gold prices quickly recovered the lost ground, breaking through the $4,100 mark.
The rebound was helped by a subtle improvement in market sentiment, as investors remained vigilant despite some softening of U.S. President Trump's rhetoric on China trade.
Instead, they are turning their attention to Friday's CPI data, which economists expect to see a 3.1% year-over-year increase in the headline CPI and a similarly flat core CPI at 3.1%. This data will directly impact the Federal Reserve's interest rate path. If inflation persists, it could reinforce market expectations for further rate cuts, benefiting non-interest-bearing assets like gold. Furthermore, US existing home sales data for September exceeded expectations, rising 1.5% to 4.06 million units, injecting a sliver of optimism into the market. However, this did not deter gold prices, which instead rose against the trend, demonstrating its safe-haven properties independent of traditional economic indicators.
Geopolitical turmoil boosts safe-haven demand
Geopolitical factors have always been a significant driver of gold price fluctuations, particularly during this recent rebound. The Trump administration's sanctions on Russian oil giants Lukoil and Rosneft in response to the war in Ukraine have reignited demand for safe-haven assets. These sanctions have not only exacerbated tensions in global energy markets but have also indirectly boosted gold's appeal as a hedge against geopolitical risks.
Meanwhile, the White House reportedly plans to restrict software exports from US companies to China in retaliation for China's controls on rare earth exports and port fees imposed on US ships, further escalating Sino-US tech tensions. These intertwined events have fostered a sustained risk-off trend, driving gold's rapid recovery from Tuesday's sharp drop. Although gold prices plummeted nearly 5.5% on Tuesday, from a high of $4,380 to a low of $4,120, and briefly dipped near $4,000 on Wednesday, geopolitical uncertainty quickly brought buying back into the market. It's worth noting that this demand isn't short-term speculation, but rather stems from global central banks diversifying away from the US dollar. For example, the European Central Bank recently announced that gold now accounts for 20% of its reserves, surpassing the euro. This marks a structural shift in gold's role from a purely safe-haven asset to a strategic reserve asset.
US government shutdown continues, potentially becoming the longest in history
The shutdown has lasted 23 days, making it the second-longest in history. If it continues beyond November 4, it will become the longest in history. Given that the Senate will be in recess until October 27, it is almost certain that the US government shutdown will continue into next week.
This shutdown is more worrisome than previous standoffs because it represents a more comprehensive government closure. Disruptions at airports are expected to worsen as air traffic controllers are unable to receive their full salaries, and aid programs that provide food to 42 million low-income people are facing disruption.
Federal workers are missing paychecks, food stamp benefits are at risk and companies await licenses, factors that continue to create perilous economic conditions during the second-longest shutdown in history.
The government shutdown has had a relatively limited impact on the economy so far, but as the impasse enters its fourth week and threatens to become the longest shutdown in history, economists are increasingly concerned that its consequences could become more severe. Some worry that large breaks or cracks could appear in the structure that could harm the economy.
When the shutdown began on October 1st, economists were relatively unconcerned about the economic impact. Based on past experience, they estimated that each shutdown would subtract about 0.1% to 0.2 percentage points from annual GDP growth. However, all of their preliminary estimates mentioned that the economic risks would increase as the shutdown continued.
The Oxford Economics team explained that "there will also be knock-on effects for government contractors, other private businesses, and consumers, and while these consequences are harder to predict, they will cause increasing damage to the economy every week."
The dual impact of the Federal Reserve's policies and the macroeconomic environment
Although the US dollar index was blocked from rising again on Thursday, closing at 98.92, up about 0.05%, the US 10-year Treasury yield climbed 4 basis points to 3.997%, and the real yield soared to 1.717%, gold prices still managed to ignore these traditional headwinds and rebounded by nearly 1%, reflecting the market's strong expectations for the Federal Reserve's loose policy.
Currently, investors have priced in a 98% probability of the Fed cutting interest rates by 50 basis points in the remainder of 2025, and nearly 100 basis points in 2026. Since the 1990s, gold has risen an average of 6% within 60 days of the Fed starting a rate-cutting cycle, providing historical support for the current market.
In addition, Morgan Stanley analysts pointed out that gold's strength stems from the Federal Reserve's interest rate cuts, the weakening of the US dollar, and continued buying by central banks and ETFs. The proportion of gold in central bank reserves has exceeded that of US Treasury bonds, the first time since 1996, symbolizing confidence in the long-term value of gold.
Gold ETFs saw a record $26 billion in inflows in the third quarter, bringing their total assets under management to $472 billion. Even retail investors are beginning to join the trend. As expectations of slower US economic growth grow, the depreciation of the dollar will make gold more attractive to international buyers, further fueling demand.
On the other hand, tariff pressure is also quietly affecting the inflation path. Wall Street institutions such as Bank of America and BNP Paribas have warned that tariff transmission will continue to push up commodity prices in the coming quarters, and core service inflation such as medical and transportation will remain stubborn, which may force the Federal Reserve to maintain a loose stance, thereby indirectly benefiting gold.
Institutional Outlook: The gold bull market is far from over
Many institutions are optimistic about the future trend of gold, which has injected more confidence into the market. JPMorgan Chase predicts that by the fourth quarter of 2026, the average price of gold may reach US$5,055 per ounce, based on investor demand and the assumption that central banks will purchase an average of 566 tons per quarter.
Morgan Stanley raised its 2026 price forecast to $4,400, over $1,000 higher than its previous estimate, suggesting a potential upside of approximately 10% by the end of next year. Analyst Amy Gower emphasized that gold is not only an inflation hedge but also a barometer of central bank policy and geopolitical risks. This forecast is supported by strong inflows into exchange-traded funds (ETFs), diversification of central bank reserves, and an influx of international buyers driven by a weakening dollar.
Despite this, the agency acknowledges potential challenges, such as an unexpectedly strong dollar or smaller-than-expected Federal Reserve rate cuts, which could lead to demand destruction. High prices are already impacting jewelry demand, with second-quarter gold jewelry consumption hitting a 2020 low. Continued weakness in this sector, which accounts for 40% of total consumption, will put pressure on prices. Furthermore, mine supply growth has been limited, averaging only 0.3% annually since 2018. While improved cash flow is prompting some producers to expand projects, environmental permitting, tax uncertainty, and financing constraints are likely to delay new mine development, preventing a capital expenditure supercycle.
Technical analysis and price path prediction
From a technical perspective, gold's upward trend resumed on Thursday. Although buyers have yet to conquer Wednesday's high of $4,161, the Relative Strength Index (RSI) shows that buying momentum is accumulating. If gold prices break through $4,200, it will open up space for $4,250, $4,300, and further to the record high of $4,380, and even $4,400.
On the contrary, if it falls back, the first support level is $4100, followed by the October 8 high of $4059. After breaking through, it may test the October 22 low of $4004. This trend echoes the fundamentals, indicating that buyers dominate the market in the short term, but we must be wary of speculative wash-outs, such as this week's sharp fluctuations aimed at clearing out "weak bulls."
At the same time, although the physical shortage in the silver market is independent of gold, it indirectly highlights the overall tight supply and demand of precious metals. 29 million ounces of silver stocks in COMEX warehouses have flowed out in two weeks, and the London market is facing a gap of 100-150 million ounces. This may be transmitted to gold through the arbitrage mechanism, strengthening its structural bull market.
Potential risks: hidden concerns under high-level fluctuations
Despite its positive outlook, gold is not a risk-free asset. Morgan Stanley warns that if the Federal Reserve's rate cut path deviates from expectations or the US dollar remains strong, gold could face a pullback. Furthermore, high prices are already triggering signs of demand destruction, with central banks potentially reducing purchases to meet reserve targets, an effect amplified by a weak jewelry market.
While the "physical squeeze" in the silver market hasn't directly affected gold, the reverse flow from the COMEX to London, coupled with opaque inventories of platinum group metals, suggests that the global precious metals delivery system is under pressure. The upcoming US Section 232 review of silver, if designated as a critical mineral, could trigger tariffs or export restrictions, indirectly impacting the pricing of gold as a related asset. In more extreme cases, government intervention could nationalize some supply for use in defense, AI, and energy sectors, amplifying market volatility.
Investors also need to watch for further news on the government shutdown and the situation between Russia and Ukraine, which may increase uncertainty.
Overall, gold's current rebound signals a continuation of its bull market, with geopolitical tensions, expectations of Fed easing, and institutional buying driving prices upward. While short-term volatility is possible, structural demand shifts ensure long-term upside potential. Investors should closely monitor Friday's CPI data and subsequent policy developments.
(Spot gold daily chart, source: Yihuitong)
At 07:18 Beijing time, spot gold was trading at $4114.45 per ounce.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
