Gold climbs to $4,190 as Trump rules out Iran strikes

Key points

• Spot gold traded at $4,189 at 14:16 UTC on Friday, up 1.3% from Thursday's close of $4,134
• It touched $4,207 in Asian and early European trade, its highest since 2 October
• The 10-year Treasury yield eased to about 5.24% and the dollar index to about 102.2
• Brent crude stayed near $103 a barrel, so the inflation worry that drove gold lower has not gone away

Gold had its best session in more than a week on Friday, climbing back toward $4,190 an ounce after President Donald Trump said the US would not attack Iran before the 3 November midterm elections. By 14:16 UTC spot gold stood at $4,189.40 on our price feed, up $54.90 from Thursday's close.

Why it matters: The pledge eased the oil-and-inflation fear that pushed Fed hike bets and Treasury yields to multiyear highs this week. Lower yields and a weaker dollar make gold cheaper to hold and cheaper for buyers outside the US.

What moved gold

The rally started in Asian hours. Gold sat near $4,145 at midnight UTC, then jumped about $30 in the 01:00 hour and kept going to a high of $4,207.10 shortly after 05:00 UTC. That is $136.50 above Wednesday's low of $4,070.60, which came as oil topped $105 on reports that the White House had asked for strike options.

Trump's post on Thursday cited "productive discussions with the Islamic Republic of Iran" and said crude was flowing through the Strait of Hormuz in record volumes. Oil reacted less than gold did. Brent futures fell about 1.4% to near $102.80 on Friday, still well above $100.

The bigger help came from bonds. On Thursday the 10-year Treasury yield fell about 12 basis points, from 5.354% to 5.235%, FXStreet reported, and hovered near 5.24% on Friday. On Friday the dollar index slipped to around 102.2 after an intraday dip below 102.

Gold's week in numbers

Gold is still lower on the month and the year. The bounce has taken back most of the drop that followed Wednesday's Fed minutes, but the price remains about $145 below its 50-day average near $4,333.

The Fed has not changed its mind

The rally does not mean rate hike bets have gone. Fed Governor Christopher Waller said on Thursday that more hikes are likely if data come in as expected, though they "do not need to come at consecutive meetings." Market pricing on Friday still put the odds of an October hike near 18% and of a December hike near 82%, CNBC reported.

That split matters for gold. A hold on 28 October with a hike in December gives the market a few weeks without a fresh shock. A surprise October move would push yields back up.

Oil is the swing factor. Brent above $100 feeds straight into US inflation, and the September consumer price index is due next week. Trump's pledge covers only the period before the vote, and NBC News reported that no final decision had been made on later action.

Where buyers stand

For US buyers, gold at $4,189 is about $119 an ounce dearer than at Wednesday's low. Holders are still down from the $4,415 level of a month ago.

Outside the US, the weaker dollar softened the move. At the 5 October rate of 3.6725 dirhams, today's spot price works out to about AED 494.6 a gram for pure gold before dealer premiums. In euros, at 0.8889 per dollar, it is about EUR 3,724 an ounce.

What to watch

• 9 Oct: CFTC positioning report at 15:30 New York time, showing how hedge funds traded the sell-off
• 14 Oct: US September consumer price index, the next test for hike bets
• 28 Oct: Fed rate decision, where markets lean toward a hold
• 3 Nov: US midterm elections, the end of the window Trump's Iran pledge covers