Gold falls below $4,100 and nears $4,000! Why is gold falling as the Middle East gets more chaotic?

Many people think that the more tense the situation in the Middle East becomes, the higher gold should rise. But over the past two days, the market has moved in exactly the opposite direction. Reuters reports that international oil prices surged to a five-month high amid escalating tensions in the Middle East. Rising oil prices have heightened inflation concerns, prompting the market to reassess the Federal Reserve’s future interest-rate path. Gold not only failed to rise on safe-haven demand, but came under sustained pressure, with spot gold briefly falling to around $4,041 on October 22, its lowest level in more than two months. Safe-haven sentiment failed to support gold. So what is the market trading now?
I think that in the short term, we can’t focus only on news from the Middle East; we also need to watch oil prices and interest-rate expectations.
① News: Why are rising oil prices weighing on gold? Rising oil prices can increase inflationary pressure. If this leads the market to expect the Fed to keep rates high for longer, or even raise rates again in the future, gold—which generates no interest income—may become less attractive. So safe-haven demand driven by geopolitical conflict may not be enough to offset the pressure from changing interest-rate expectations. The Fed meeting on October 27–28 and subsequent US PCE inflation data could both trigger fresh volatility.
② Market structure: This looks like more than an ordinary pullback. On the 1-hour chart, gold had already formed a bearish structure of lower highs and lower lows, with prices trading consistently below declining moving averages. The latest sell-off has extended the decline, indicating that sellers remain in control. Notably, trading volume expanded significantly during the fall, suggesting a more intense battle between buyers and sellers at key levels.
③ Key level: $4,000 is both a psychological threshold and a point to watch. Around $4,000: This is currently the most important psychological threshold to watch. If prices break below it and stay there, while failing to reclaim it on a rebound, the bearish structure could continue.
Around $4,070–$4,100: This can serve as an area to watch for a short-term rebound, but the latest prices need to be checked to confirm whether it has turned into resistance. If a rebound is met with resistance here and buying volume is insufficient, it would indicate that buyers have yet to regain control.$XAUUSD