Earlier, gold was ticking a bit higher, along with equity indices. But it didn’t feel like a market with real conviction behind it. Lo and behold, markets gave up those earlier gains on reports Iran had rejected Trump’s temporary ceasefire plan. But this shouldn’t come as surprise as Iran has repeatedly called for a lasting peace deal with several pre-conditions. Indirect talks are still ongoing apparently, and traders are essentially sitting on their hands ahead of the 8PM ET deadline set by Trump for a deal with Iran. With something this binary hanging over markets, it’s no surprise positioning has been light, and markets range-bound. After last week’s roughly 4% rally, traders will want to see some further upside this week to confirm prices have formed a base for now. We maintain a cautious gold forecast while the situation regarding the flow of oil through the Strait of Hormuz is unresolved.
Gold forecast: Metal pulled in two directions
At the moment, gold’s stuck between competing forces. On one hand, the geopolitical backdrop should be supportive. Ongoing tensions in the Middle East, particularly around the Strait of Hormuz, are keeping a floor under prices as investors seek the metal to protect against the potential inflationary implication of surging oil prices on fiat currencies. On the other, rising inflation expectations is also pushing yields and the dollar higher. That’s where the problem lies for gold forecast. If rates are expected to stay higher for longer, this is not something positive for non-interest bearing assets like gold and silver.
In other words, a lot will depend on crude oil prices now. If Brent rises above $110, that pressure probably doesn’t go away. In fact, it could intensify. However, a big drop in oil prices will likely provide breathing space for all risk assets, including gold and silver.
All eyes on the deadline
The near-term direction for gold is entirely dependent on today’s deadline now. Trump’s rhetoric has been pretty punchy, even by his standards, and markets are clearly taking it seriously. There’s still a sense that some form of agreement might come through, but confidence isn’t exactly high.
If a deal does materialise, you’d likely see oil ease, yields come off a touch, and gold find a bit more breathing room.
If it doesn’t, things get trickier. Risk sentiment would probably take a hit, but that doesn’t automatically mean gold flies higher. If oil spikes again and drags yields up with it, gold could actually struggle despite the risk-off tone.
Gold technical analysis and levels that matter
From a technical analysis point of view, gold is currently ranging.
Support for XAUUSD sits around $4,580–$4,600, then $4,500. The bigger level, though, is $4,400. That held after the late-March drop and still feels like the key downside line. If that gives way, things could unravel a bit towards $4,100, maybe even $4,000.
On the topside, $4,800 is the first hurdle. Above that, $4,900 comes into view, with $5,000 still the big level if momentum really picks up again.
For now, it’s a waiting game. Gold is being pulled in different directions. The next proper move likely comes down to whether this deadline delivers a deal… or something quite a bit messier.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
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