Gold price rebound faces a test as US Treasury yields fall

Huitong Network, November 6—— Technical traders have ample reasons to explain why gold prices have suddenly reversed upward. Many believe gold has broken out above the previous descending channel that was dominating market sentiment. Fundamental traders, on the other hand, tend to believe gold was simply oversold earlier, and the price rebounded into a familiar trading range, triggering buying interest. However, overall market sentiment is actually the combined result of technical logic and fundamental factors. What short-term traders are testing now is a price range they have previously interacted with.

Technical traders have ample reasons to explain why gold prices have suddenly reversed upward. Many believe gold has broken out above the previous descending channel that was dominating market sentiment. Fundamental traders, on the other hand, tend to believe gold was simply oversold earlier, and the price rebounded into a familiar trading range, triggering buying interest. However, overall market sentiment is actually the combined result of technical logic and fundamental factors. What short-term traders are testing now is a price range they have previously interacted with.

The current upward momentum in gold prices is quite impressive, but it is important to note that this change in the broader market has been driven by overall weakness in the US Dollar. Stock indices remain cautious, and US Treasury yields are falling in tandem. Since hitting lows last Friday, gold has performed well, with most of the market believing that prices entered oversold territory at that time, providing a buying opportunity.

However, bulls who entered the market in the past two days now have to face a reality: the price range where gold is currently trading also features strong resistance. The dip-buying wave that started on Tuesday will continue to face significant challenges in the short and near-to-medium term. It is still too early to say whether gold has broken out of its weak phase; from a mid-term framework, gold prices are still in a bearish structure. Notably, the shift in the US Dollar and US Treasury yields may be fostering optimism for gold, but this positive trend still requires more time to be confirmed—it cannot be concluded based on only two days of gains.



Gold is trading around $4,100/ounce, a significant improvement for bulls compared to last Friday’s low of $3,850. The current rebound started on Tuesday, with prices closing up again yesterday. Many investors believe gold had been persistently oversold for several weeks and is now undergoing a recovery.

Recently, the US Dollar has weakened, and at the same time, West Texas Intermediate crude oil (WTI) prices have retreated, leading the market to interpret that inflationary pressures may be easing. For many fundamental gold traders, this logic may seem somewhat counterintuitive, but the key support comes from US Treasuries: the burden on Treasuries has eased in the past two days. However, bulls should not be overly optimistic; gold overall remains in a relatively low price range, and the market is likely to maintain wide fluctuations going forward.



Bulls in the gold market should not prematurely declare that mid-term expectations have completely reversed. The upward momentum for gold cannot be confirmed simply by a few days of gains. While there is potential for further upward movement, it must also be considered that optimism in the US Treasury market may not persist.

Concerns in the US stock market have not yet dissipated, and should Wall Street experience a major sell-off, it could bring new downward pressure for gold. Those interested in positioning in gold may take a relatively optimistic stance later this week, but should avoid chasing higher prices aggressively, as there is still significant intraday volatility and uncertainty.




(Spot Gold Daily Chart Source: YiHuitong)

If US stocks experience a sharp drop and US Treasury yields begin to rise again, gold will come under pressure. Another potential bearish variable is if President Trump makes tough statements on the Iran situation, which may fuel a rebound in energy prices. Global investors remain generally cautious; bullish views will continue to be tested, and there is a need to guard against sudden negative surprises reversing gold’s direction once more.

The buying interest in gold has been solid over the past two days. However, from a mid-term chart perspective, gold remains in a low range to a large degree. Short-term gold prices are highly driven by market sentiment, but currently the bullish foundation is not secure, and prices could quickly fall again at any time.



By observing how gold prices perform at nearby support and resistance levels, we can determine whether the current round of buying will continue to build momentum or whether it is gradually exhausting.



In the upcoming trading sessions, the market will test whether the weaker US Dollar and falling US Treasury yields can provide sustained support for gold. Key points of interest include whether new buying interest enters on pullbacks, and whether bullish sentiment can be maintained as gold tests resistance levels. The ongoing cautious atmosphere in equities and further oil price volatility remain unresolved risk factors. The central question is whether the improving market sentiment can withstand these risk tests, instead of quickly fading after an initial rebound.