Gold reclaims $4,200 as weak US sentiment revives bullion demand

On Friday, gold prices surged above $4,200, driven by a dip in US Treasury yields and a weaker US dollar, despite recent US data indicating a pessimistic outlook for the economy. The University of Michigan Consumer Sentiment Index for October fell to 46.3, below expectations of 47.6. Consumer spending may decline in the near future, but Federal Reserve officials still view the economy as resilient, backed by a robust job market.

Fed officials' meeting minutes released on Wednesday showed a united front for a rate hike, although opinions differed on its timing. Fed Governor Christopher Waller supported additional rate hikes, while St. Louis Fed Alberto Musalem emphasized the need to tackle high inflation due to a strong labor market. The 10-year US Treasury yield increased by 1.3 basis points to 5.248%, aiding the dollar's decline.

The US Dollar Index rose 0.18% to 102.30. Despite ongoing tensions between the US and Iran, the conflict in Hormuz and the Red Sea persisted. Gold's recovery momentum has shifted mildly bullish, with the Relative Strength Index (RSI) rising but remaining below its 50-neutral level. If gold finishes Friday's session and the week above $4,200, it could lead to a strong recovery, with the next resistance at the 100-day Simple Moving Average (SMA) of $4,260.

A break above this level could propel gold towards the 50-day SMA of $4,335, then the 200-day SMA of $4,529. Conversely, if gold drops below $4,150, it may target the $4,100 level, followed by the psychological $4,050 mark and the July 29 cycle low of $3,996. Gold, a safe-haven asset, has been widely held by central banks to bolster their currencies during turbulent times.

Geopolitical events, oil prices, US Treasury yields, the US dollar, and upcoming inflation data will influence gold's price movement.