Gold prices continued to recover, marking a third consecutive session of gains and pushing XAU/USD back above the 4,300 USD/oz level after a sharp correction.
This move suggests that dip-buying demand has become more evident as the market reassesses the outlook for interest rates, inflation, and the strength of the U.S. dollar.
One notable supportive factor has been the sharp decline in oil prices. Although easing geopolitical tensions may reduce traditional safe-haven demand for gold, lower energy prices are creating an indirect positive effect.
If oil remains at lower levels, input inflation pressures could ease, reducing the risk that the Fed will need to maintain an overly tight policy stance for an extended period.
For gold, this is important because lower rate expectations typically reduce the opportunity cost of holding a non-yielding asset.
In addition, the U.S. dollar weakened slightly to around 99.3, further supporting gold’s rebound. After being supported by relatively resilient U.S. economic data and expectations that the Fed would keep rates elevated, the dollar is now showing signs of losing momentum. A softer dollar makes gold more attractive to investors holding other currencies, while also reflecting that the market is no longer leaning as strongly toward a prolonged tight U.S. monetary policy scenario.
From a longer-term perspective, gold’s underlying support remains intact. Global gold demand is still relatively solid, especially as central banks and investors continue to seek hedges against inflation risks, policy uncertainty, and geopolitical volatility. Meanwhile, gold ETF flows have shown signs of improvement after a previous period of outflows, suggesting that institutional investor sentiment is gradually stabilizing. This is important because ETF flows often reflect medium-term expectations for gold rather than short-term reactions to geopolitical events.
Overall, the current rise in gold can be viewed as a technical recovery supported by a more favourable macro backdrop. However, for the uptrend to become more sustainable, the market will need further confirmation from the upcoming Fed meeting and the next moves in the U.S. dollar. If the Fed delivers a more dovish message, Treasury yields cool, and the dollar continues to weaken, gold could extend its recovery toward 4,500 USD/oz in the short term. Conversely, if the Fed maintains a hawkish stance or the dollar rebounds, gold’s recovery could lose momentum and the market may return to a more cautious tone.
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