GDFS TRADE Gold Analysis, October 26, 2026
Previous Day’s Review:
Gold prices continued their weakness on Friday. Opening at 4,024, prices rebounded to 4,034 in the early session, but buying interest failed to sustain the gains, and prices subsequently fell below the 4,000 level, reaching a low of 3,975.5, the first time this level had been breached since the end of July. A slight recovery occurred towards the close, with spot gold settling at 3,995.4, a daily decline of 0.72%. The cumulative weekly decline exceeded 4%, marking the largest weekly drop in over four months. The core driver of this decline was not the disappearance of safe-haven demand, but rather the inflation and interest rate reassessment triggered by the surge in oil prices: Brent crude settled at $116.72 on Friday, a six-month high, surging approximately 6.2% for the week. Seven consecutive attacks on Saudi airports and oil and gas facilities in Yanbu and Shebach fueled market concerns about supply disruptions, intensifying expectations of sticky inflation and pushing the probability of a December rate hike to nearly 90%. On the same day, a tech-driven stock market sell-off triggered margin calls, and gold, as the most liquid asset, was sold off to realize profits, forming a liquidity-driven second wave of decline. This morning, Asian trading initially rebounded to $3,996.9 following the decline in oil prices, but subsequently fell again and broke below $3,980, currently trading at $3,980.
Today’s Analysis:
The current market has shifted from range-bound trading to a downward breakout. The $4,000 level, a support level that has held for several days since July, has been effectively breached. Structurally, this represents an extension of the downtrend, rather than a single day’s emotional outburst. Today’s market movement could unfold in three ways. The baseline scenario is a weak consolidation after the breakdown, with prices fluctuating between 3,975 and 4,010, awaiting direction from this week’s interest rate decision. Any rebounds during this period will be met with resistance between 4,000 and 4,010. The second scenario is a continuation of the decline. If Friday’s low of 3,975 is breached, the next target is the July low zone of 3,943 to 3,950. A break below this zone would open up space towards 3,900. The third scenario is an oversold rebound, but this requires prices to regain a foothold above 4,010 and recover 4,020. The resistance level of 4,034 is Friday’s high; any upward movement before this level is breached can only be considered a technical pullback after the breakdown. Given the current combination of high oil prices and a still relatively strong dollar and yields, the probability of the baseline scenario and a continuation of the decline combined is significantly higher than a rebound.
Fundamentals:
The market saw a slight easing this morning: Trump stated that a trilateral meeting between the US, Russia, and Ukraine would be held “soon,” causing oil prices to plummet at the open. Brent crude fell to around $110.4, down about 1.5%, while West Texas Intermediate (WTI) crude was at $101.8. This eased the inflation fears fueled by energy prices last week, directly contributing to gold’s early rebound above $4,000. However, this easing was insufficient to reverse the overall trend, as Middle East risks persist. Houthi attacks on Saudi Arabia continue, and rumors circulate that the US might take action against Iran after the midterm elections, with Iran reportedly preparing retaliation. Oil prices merely retreated from extreme highs, remaining above $110 in absolute terms, indicating the inflation transmission chain remains effective. The Fed has entered its quiet period, and federal funds rate futures this week indicate a roughly 90% probability of no change. However, the near 90% pricing in a December rate hike is the real force suppressing gold prices. The 10-year Treasury yield remains above 5%, and the dollar is strengthening in tandem, systematically increasing the opportunity cost of zero-interest assets. There are no major data releases today, and the Dallas Fed manufacturing survey at 22:30 will have limited impact. The real variables are all concentrated in the interest rate decision and subsequent data.
Technical Analysis:
From a macro perspective, the downward channel formed after the February peak at 5400, with lower highs and lower lows, remains intact. The high of 4700 in September and the secondary high of 4217 in October act as resistance levels. Last week’s break below 4000 further confirmed the breakdown of the July-October trading range. The medium-term bearish trend is undeniable, and a recovery requires at least a retest of the 4100-4120 range. The first support level to watch is 3,975 to 3,980, which overlaps with Friday’s low and this morning’s low. The next support is the dense area of July’s lows, between 3,943 and 3,950, followed by the psychological level of 3,900. The first resistance level is 4,000, which, once broken, has become resistance. The next resistance is the pullback zone between 4,010 and 4,020, with stronger resistance at Friday’s high of 4,034 and 4,060. After a continuous short-term decline, the price has entered oversold territory, and momentum indicators are showing signs of weakening. The price has been trading in narrow ranges above 3,975, indicating a sideways consolidation within a downtrend, without a clear reversal pattern.
Trading Strategy:
The highest probability-of-win strategy for the day is to short at the 4,000-4,010 resistance zone, waiting for the price to retrace to this area and show a long upper shadow, a second resistance, or a surge in volume followed by stagnation before entering the market. The initial target is 3,975, with a follow-up move to 3,950 if it breaks down decisively, and further down to 3,943. The second strategy is to lightly trade a pullback after the breakout if the 3,975-3,980 level fails to hold immediately and a higher low appears in the short-term chart, targeting only 4,000-4,005. Exit immediately upon reaching this price; this is a short-term counter-trend trade and should not be held for too long. The current price of 3,980 is close to support, at the lower end of the range. It is not advisable to chase the short position or take a large long position. A more favorable risk-reward ratio is needed if the price returns to the 4,000-4,010 range. If the price strongly recovers and holds above 4,020, the short position strategy is immediately invalidated. Instead, wait and see if there’s a pullback to 4,030-4,034 before making a decision. Avoid heavily betting on a single direction before the interest rate decision.
Important Notes and Data Releases Affecting the Gold Market This Week (GMT+8):
Today, October 26th, 22:30: Dallas Fed Manufacturing Survey – Limited Impact.
Tomorrow, October 27th, 20:30: September Durable Goods Orders (Preliminary) – 22:00: October Consumer Confidence Index, September New Home Sales, and Richmond Fed Manufacturing Survey.
October 28th: First day of the interest rate meeting – No data releases. The Federal Reserve will release its Federal Funds Rate decision and policy statement at 2:00 AM on October 29th, followed by a press conference at 2:30 AM. At 8:30 PM on the same day, the preliminary Q3 GDP figures, personal income, PCE price deflator, and the latest weekly initial jobless claims will be released. The Q3 Employment Cost Index will be released at 8:30 PM on October 30th. This week is a super week for interest rate decisions; liquidity will likely tighten temporarily before and after the meetings. Key levels after a breakout are prone to false breakouts. Oil prices and Middle East news in the evening could rewrite inflation expectations at any time. Confirmation of breakouts should be based on closing price action. Strict position control is crucial; avoid holding heavy positions overnight before the decision is announced.
Summary:
Gold is currently trading at $3,980. It fell below $4,000 last Friday, hitting a three-month low, and dropped over 4% for the week. The sharp rise in oil prices, pushing up inflation and expectations of a December rate hike, coupled with liquidity liquidation triggered by the stock market sell-off, are the two main drivers of this decline. Oil prices fell this morning due to news of the US-Russia-Ukraine talks, while gold prices briefly climbed back above $4,000 but then broke below $3,980 again, reflecting that sellers still dominate and the rebound is merely a technical pullback after the breakdown. The key support levels are $3,975 and $3,943-$3,950, while the resistance zone is $4,000-$4,010, which will be crucial for any rebound. The main trading strategy is to short at $4,000-$4,010, and only consider a small long position if the price finds support at $3,975. Reduce positions before the interest rate decision, avoid betting on one side, and strictly adhere to the risk-reward ratio and position sizing discipline.
Risk Disclosure: This market commentary is for reference only and does not constitute any investment advice. Unpredictable and unforeseen risks exist in the market; please manage your risks carefully.