Gold is rebounding because easing US-Iran tensions lowered the immediate shock risk, but not enough to convince traders that the danger has left the price.
Gold price (XAU/USD) traded near $4,240 in early European trade on Friday, bouncing from a six-month low after President Donald Trump said he canceled planned military strikes against Iran, according to FXStreet. That sounds counterintuitive. Less war risk should usually weaken gold. Instead, the metal caught a bid.
The cleaner read: this is not a pure panic trade. It looks more like a reset after an aggressive selloff, helped by lower US Treasury yields, a softer US Dollar, and doubts over whether the US-Iran channel is actually settled.
Gold's rebound near $4,240 shows traders don't believe the Iran risk is gone
The headline says tensions eased. The price action says traders are not ready to declare the risk dead.
Trump’s decision to call off planned strikes reduced the probability of a fast military escalation. FXStreet cited a BBC report saying Trump said negotiations with Tehran were “brought to the highest level of Iranian leadership and approved.” That line helped fuel hopes that a truce deal could be close.
Iran’s response was less final. Tehran said it “has not yet reached a final conclusion regarding an agreement.” That matters. Gold is not rallying because the market sees a clean peace deal. It is rallying because the market sees a dangerous situation that may be cooling, but still has enough uncertainty to keep insurance demand alive.
“Gold is clearly significantly oversold just now, and it remains to be seen whether this is a recovery as such or simply short positions taking profit,” independent analyst Ross Norman said.
That quote is the key to the whole move. A rebound from a six-month low can look bullish on the screen while still being driven by short covering rather than new conviction.
For related XOOMAR metals context, see our prior coverage on $4,118 Gold Bounce Fails as Fed Hike Bets Bite Hard and $64 Bounce Tests XAG/USD Bulls in Silver Price Forecast. The common thread is simple: metals rallies need more than a headline. They need confirmation from rates, the dollar, or sustained demand.
The XAU/USD levels that now carry the signal
The first number is $4,240. That is the current pivot area cited by FXStreet.
The second is the six-month low. The source does not give the exact low, so it should be treated as a reference zone rather than a precise technical level. If gold slips back toward that area, the rebound starts to look like a failed bounce. If it holds above current levels and attracts follow-through, the market may start treating the selloff as overdone.
The source does not provide named resistance levels, so inventing them would be false precision. The better framework is conditional:
| Market input | If it moves this way | Likely effect on gold |
|---|---|---|
| US Dollar | Weakens | Supports XAU/USD |
| US Treasury yields | Fall | Supports gold because it pays no yield |
| Crude oil | Stays elevated or rises | Can support inflation hedging, but may also keep rates higher |
| Fed expectations | Shift toward tighter policy | Caps gold upside |
| Iran headlines | Deal stalls or messaging conflicts | Keeps geopolitical premium alive |
The tension sits in that oil-rate channel. FXStreet notes that hopes for diplomacy dragged yields and the dollar lower, supporting gold. But elevated crude prices can accelerate inflation and keep interest rates higher for longer. That is where the rebound becomes fragile.
Gold likes falling yields. Gold also likes fear. It struggles when inflation risk pushes central banks toward tighter policy.
Trump's canceled Iran strikes lower the heat, but gold still prices the next mistake
Canceling strikes reduces the immediate chance of a sharp escalation. In a simple model, that should drain safe-haven demand.
This situation is not simple. A canceled strike also confirms that military action was seriously close enough to be planned. That keeps a risk premium in the market, even if the first reaction is relief.
The truce channel is now the main variable. If a US-Iran deal becomes credible and Iran confirms a final agreement, gold could lose part of its crisis premium. If the process stalls, or if official statements keep conflicting, traders have a reason to keep holding protection.
Oil is the bridge between geopolitics and monetary policy. FXStreet flags elevated crude prices as a possible cap on gold because stronger inflation pressure could keep rates higher for longer. That is the paradox in this rebound: the same Middle East risk that can support gold through fear can also hurt gold if it pushes inflation and rate expectations higher.
The Federal Reserve piece is direct. FXStreet says the Federal Reserve is expected to leave rates unchanged in Kevin Warsh’s first meeting as Fed chair next week, while traders price nearly a 67% probability of a US rate hike in December, according to the CME FedWatch tool. That is not an easy backdrop for a non-yielding asset.
The buyer split is narrower than the headline suggests
The source material does not show which trader groups bought the rebound. That limits what can be said with confidence.
What is supported is this: central banks remain an important structural force in gold. FXStreet’s FAQ section says central banks added 1,136 tonnes of gold worth around $70 billion to reserves in 2022, the highest yearly purchase since records began. The World Bank Data Blog adds that gold demand rose 10 percent in the first three quarters of 2025 year over year, helped by investment inflows and continued central bank purchases.
The World Bank also says central bank purchases since 2022 have been more than twice their 2015-19 average, with central banks’ share of total demand rising to nearly 25 percent in 2024, compared with 12 percent in 2015-19.
That does not prove central banks bought this specific dip. It does show why gold can remain supported even when a geopolitical headline cools. There is a structural reserve-diversification bid beneath the faster-moving dollar, yield, and Iran trades.
The old gold playbook still applies, but the price is already rich
Gold’s current setup fits the classic pattern described by the World Bank: uncertainty rises, the dollar weakens, monetary conditions soften, and gold catches demand.
The World Bank said gold briefly exceeded $4,300 per ounce in October 2025 and that precious metal prices are projected to reach new all-time highs in 2026, after an estimated 41 percent increase this year. It also said gold prices are set to rise by around 42 percent in 2025, the strongest annual gain since the late 1970s.
That context matters because gold near $4,240 is not rebounding from a depressed long-term base. It is rebounding inside a market that has already absorbed a huge move. That makes positioning more important. When prices are elevated, a diplomatic headline can hit harder, and a short-covering bounce can fade faster if yields or the dollar turn.
The lazy explanation is “war risk up, gold up.” The better one is stricter: geopolitics can trigger the move, but sustained gold rallies usually need help from lower yields, a weaker dollar, inflation anxiety, or central bank demand.
Three paths for gold after the US-Iran truce signal
Gold’s next move depends on which force wins: diplomatic relief, rate pressure, or renewed uncertainty.
| Path | Trigger | What would confirm it |
|---|---|---|
| Bullish repair | Truce talks stall, oil stays elevated, yields fall, or the dollar weakens | Gold holds above the $4,240 area and extends the rebound |
| Headline range | Iran tensions cool but rate pressure does not intensify | XAU/USD chops near $4,240 without a clean break |
| Failed bounce | A credible deal removes risk premium while yields and the dollar firm | Gold retests the recent six-month low area |
For traders, the prescription is discipline. A bounce driven by short covering can move quickly, then vanish when the headline changes.
For hedgers, gold still has a role, but the reason must be clear. The case is not just war risk. It is protection against policy shocks, inflation surprises, and dollar weakness, all of which are present in the source material as relevant drivers.
The evidence to watch is narrow and testable: Iran’s next official position on a deal, the direction of US yields, the dollar’s reaction, crude prices, and whether Fed hike pricing moves beyond the nearly 67% December probability cited by FXStreet. If easing tensions arrive with lower yields and a softer dollar, gold can keep repairing. If peace talk collides with a stronger dollar and higher rate expectations, the rebound will look less like a turn and more like shorts taking profit.
Disclaimer: This XOOMAR analysis is for informational and educational purposes only. It is not financial, investment, legal, tax, or professional advice. It does not provide buy, sell, hold, price-target, portfolio, or personalized recommendations. Verify information independently and consult qualified professionals before making decisions.
The Bottom Line
- Gold’s rebound shows traders still see geopolitical risk despite easing US-Iran tensions.
- Lower US Treasury yields and a softer US Dollar are helping support the metal after its selloff.
- The move may reflect short-covering from oversold levels rather than a confirmed bullish reversal.
Originally published on XOOMAR. For more news and analysis, visit XOOMAR.
