Gold Prices Rebound as Bargain Hunters Step In, Weaker Dollar Offers Support

Gold prices rebound after their steepest one-day drop since 2020, supported by bargain-hunting and a softer U.S. dollar. Investors now await U.S. inflation data for clues on the Federal Reserve’s next interest rate moves.

1. Gold Stages Recovery After Sharpest Decline Since 2020

Gold prices bounced back on Wednesday, October 22, as bargain hunters returned to the market following a steep selloff in the previous session. Spot gold rose 0.6% to $4,146.47 per ounce as of 06:36 GMT, recovering from a more than 5% plunge on Tuesday—its sharpest single-day fall since August 2020.

The rebound was largely driven by technical buying after an oversold correction and a weaker U.S. dollar, which made bullion more attractive to investors using other currencies.

Meanwhile, December gold futures on COMEX were also trading higher around $4,160 per ounce, signaling easing volatility after a dramatic selloff that shook precious metals markets earlier in the week.

2. Key Drivers Behind the Rebound: Technicals, Dollar Weakness, and Fed Watch

Technical Correction After an Overheated Rally

Analysts noted that Tuesday’s plunge was primarily a technical correction, following weeks of strong gains without meaningful pullbacks.

“Gold had simply gone too far, too fast — the correction was overdue to restore balance,”
said Rhona O’Connell, senior analyst at StoneX.

She added that the $4,000 per ounce level has acted as a strong psychological support. As prices approached that threshold, bargain-hunting quickly emerged, triggering the rebound seen in early Wednesday trading.

Weaker U.S. Dollar Boosts Gold Demand

The U.S. dollar index (DXY) slipped 0.1% during the session, making gold cheaper for foreign investors. This inverse relationship often supports the metal during periods of dollar weakness.

At the same time, U.S. 10-year Treasury yields eased slightly to 4.12%, adding further support for non-yielding assets such as gold. Lower yields reduce the opportunity cost of holding bullion and tend to encourage safe-haven flows.

Investors Turn Focus Toward U.S. Inflation Data

Market participants are now closely watching the upcoming U.S. inflation report, expected later this week, for hints about the Federal Reserve’s next policy direction.

If inflation continues to moderate, traders believe the Fed could soon begin a rate-cutting cycle—a scenario historically bullish for gold. However, stronger-than-expected inflation could delay such moves, keeping gold under pressure.

“All eyes are on the Fed. Any dovish signal will quickly reignite the gold rally,”
noted a market strategist at Reuters Global Markets Forum.

3. Broader Market Reaction: Volatility Extends to Commodities and Equities

The rebound in gold also echoed across other precious metals:

Silver gained about 1% to $51.24 per ounce.

Platinum slipped 1.1%, while palladium rose 1.4%.

On the equity side, the Stoxx 600 Europe Index edged down 0.3%, and Wall Street futures traded lower as global markets remained cautious ahead of key macroeconomic data.

According to analysts, the wild swings in gold reflect broader global uncertainty, where investors continue to navigate a delicate balance between chasing returns and hedging against economic and geopolitical risks.

4. Technical Outlook: The $4,100 Level Remains Critical

Technically, gold is consolidating within a narrow range between $4,100 and $4,200 per ounce, with the $4,080 mark serving as immediate support.

If bullion can hold above this zone, it could regain bullish momentum, with upside targets near $4,250 to $4,300.
Conversely, a decisive break below $4,080 would expose the market to further downside pressure, potentially retesting the $4,000 psychological level.

The Relative Strength Index (RSI) currently sits around 46, suggesting a neutral stance — neither overbought nor oversold — though momentum indicators hint at a gradual shift toward renewed buying interest.

5. Investor Strategy: Opportunity or Trap?

In the short term, analysts recommend a cautious trading approach as volatility remains elevated:

Existing holders may consider partial profit-taking near $4,200, where resistance appears firm.

New buyers should wait for dips toward $4,100 before entering fresh long positions.

For medium-term investors, gold remains a strong defensive asset, particularly if the Fed signals rate cuts toward the end of 2025.

According to Caroline Bain, chief commodities economist at Capital Economics:

“We expect gold to hold near $4,200 through Q4 before potentially breaking above $4,400 in 2026, provided the Fed begins easing monetary policy.”

6. Outlook: Gold Still Shines Amid Fed Uncertainty and Global Volatility

The sharp rebound in Wednesday’s session underscores that gold continues to serve as a preferred safe-haven asset amid a turbulent global environment.

Yet, its next move will largely depend on three key factors: U.S. inflation trends, the dollar’s trajectory, and the Federal Reserve’s rate outlook.

With ongoing geopolitical tensions and uneven global growth, gold remains a critical portfolio hedge—offering both stability and diversification as markets await clearer economic signals from Washington.

FQAs

Q1: Why did gold prices rebound after a 5% drop?
A1: The rebound was driven by bargain-hunting after an oversold correction and a weaker U.S. dollar, which made gold more appealing to global investors.

Q2: What upcoming data could influence gold prices?
A2: The U.S. inflation report and subsequent signals from the Federal Reserve regarding interest rates will be key catalysts for gold’s next major move.

Q3: Is now a good time to buy gold?
A3: Gold is currently stabilizing after a steep correction. Long-term investors may consider gradual accumulation, while short-term traders should wait for clearer trend confirmation.

Q4: What is the gold price outlook for late 2025?
A4: Analysts expect gold to hover around $4,200 by year-end, with potential to exceed $4,400 in 2026 if the Fed shifts toward rate cuts.