Spot gold rebounded 2% on Monday to $3,952.30 an ounce after falling to a more-than-one-year low, as buyers returned at lower prices. But Pepperstone market strategist Wu Diling said the metal needs to regain $4,000 to ease recent downside pressure. Interest-rate expectations and tighter financial-market liquidity remain obstacles to a sustained recovery.
Gold rebounds from $3,870, with $4,000 still in focus
Gold fell through the key $4,000 and $3,900 levels last week, reaching $3,870—its lowest point in more than a year. Wu said the sell-off had significantly weakened the technical picture. Buying emerged at the start of this week, and the 14-day relative strength index was nearing oversold territory, but the trend remained weak and further declines were still possible.
Gold pays no interest, so a stronger dollar and persistently high real yields raise the opportunity cost of holding the metal and could restrict its recovery. Wu said a move back above $4,000, alongside fading expectations for further rate increases and more stable liquidity, would help determine whether the rebound can last.
Rate expectations and deleveraging weigh on gold
The Federal Reserve held interest rates steady last week, but stronger-than-expected economic data reinforced expectations that its tightening cycle may not be over. Traders are still pricing in the possibility of a rate increase in December. Higher-rate expectations are a headwind for gold, while recent market volatility and demand for liquidity have added to selling pressure, Wu said.
Technology stocks fell sharply last week, with Intel down nearly 29% on Friday. The decline renewed investor scrutiny of the scale of investment in AI infrastructure and its potential returns. Investors cutting exposure to riskier assets may also sell gold to meet margin calls or raise cash.
In this environment, Wu said, safe-haven flows have favored government bonds, while gold has faced pressure from investors liquidating holdings and reducing leverage. A decline in bond yields alone may not be enough to sustain a rally.
Jobs report to shape December rate bets
Markets are also watching the U.S. midterm elections, technology-company earnings and Friday’s October nonfarm payrolls report. Election results could shift expectations for future government spending, budget deficits and Treasury issuance, with potential knock-on effects for bond yields and the dollar. If a change in congressional control leads markets to expect smaller future deficits, long-term yields could fall and offer some support to gold. But easing political uncertainty could also lift the dollar and limit gains.
The jobs report is a key focus for gold this week. Economists expect the U.S. economy to add 65,000 jobs in October, up from 29,000 in September, while the unemployment rate is forecast to hold at 4.2%. A stronger-than-expected reading, coupled with persistent wage pressures, could strengthen expectations of a December rate increase and support the dollar and real yields. Weaker employment data could ease expectations for further monetary tightening and give gold some breathing room.
Wu cautioned, however, that a soft jobs report may not provide lasting support if financial-market stress continues. If economic weakness triggers further selling in risk assets and investors keep raising cash and cutting leverage, gold could still face forced selling.