The gold price (XAU/USD) remains stable on Friday and could end the week with an augment of almost 2% as the US dollar falls on optimism about Iran-US talks in Pakistan throughout the weekend. Moreover, the moderately high inflation report in the US weakened the dovish forecasts of the Federal Reserve (Fed) for 2026. The rate of the XAU/USD pair is $4,763, up 0.01%.
Gold’s faith in US-Iran talks
Improved risk appetite pushed bullion prices higher even as Israeli attacks on Lebanon continued, threatening to end a two-week ceasefire agreed by the US and Iran. On the other hand, Tehran also failed to open the Strait of Hormuz, which US President Donald Trump described as “dishonorable, as some say, to allow oil to flow through the Strait of Hormuz. We have no such agreement!”
US-Iran talks will start on Saturday. The Iranian delegation will take part in the negotiations despite several statements indicating that Lebanon is part of the ceasefire agreement, Al Hadath reported.
US Vice President JD Vance is on his way to Pakistan and commented that “if the Iranians are willing to negotiate in good faith, we are certainly willing to extend an open hand. If they try to cheat with us, they will find that the negotiating team is not that open.”
Inflation in the US remains at 3%; what would the Fed do?
Data from the US showed that March inflation was in line with forecasts, as the US Consumer Price Index (CPI) increased by 3.3% y/y, compared to 2.4% in February. Core CPI also rose from 2.5% to 2.6% y/y, below estimates of 2.7%. As such, investors remain skeptical about the Federal Reserve cutting borrowing costs and expect the Fed funds rate to remain unchanged in the 3.50-3.75% range for the rest of 2026, according to data from Prime Market Terminal (PMT).
Additionally, consumer sentiment at the University of Michigan (UoM) dropped to a record low in April, falling from 53.3 to 47.6. At the same time, American households expect inflation to augment from 3.8% to 4.8% over the next 12 months, driven by the war in the Middle East that has caused prices to soar.
San Francisco Fed President Mary Daly downplayed the CPI surprise, saying it was expected, and pointed to the ceasefire as a key variable. She added that the policy is restrictive enough to tame inflation while supporting jobs.
Meanwhile, the US Dollar Index (DXY), which tracks the dollar against six currencies, fell 0.13% to 98.66, near a four-week low, representing a tailwind for gold prices.
Next week’s US economic report will include housing data, the Producer Price Index (PPI), employment data and Fed speeches. However, gold traders would pay attention to the resumption of the first round of US-Iran talks in Pakistan, with the reopening of the Strait of Hormuz.
XAU/USD Technical Outlook: Rejected at $4,800, 20- and 100-Day SMA Confluency Target
The gold price remains bullish, but has struggled to break key resistance over the past two days. Three days ago, the price of gold bullion hit a three-week high of $4,857, but buyers failed to keep spot prices above the psychological level of $4,800.
If sellers push gold below $4,750, a move towards the $4,700 level is expected. Below is the convergence of the 20- and 100-day plain moving averages (SMAs), each at $4,674-$4,662.
Conversely, if gold recovers to $4,800, it would expose the April 8 intraday high of $4,857. With continued strength, buyers will be able to break the $4,900 mark.
Gold FAQs
Gold has played a key role in human history as it has been widely used as a store of value and a medium of exchange. Nowadays, beyond its luster and operate in jewelry, the precious metal is widely viewed as a safe-haven asset, meaning it is considered a good investment in turbulent times. Gold is also widely seen as a hedge against inflation and currency depreciation because it is not tied to any particular issuer or government.
Central banks are the largest holders of gold. To support their currencies in turbulent times, central banks typically diversify their reserves and purchase gold to improve the perceived strength of the economy and currency. High gold reserves may provide a source of confidence in the country’s solvency. According to data from the World Gold Council, central banks added 1,136 tons of gold to their reserves in 2022, worth about $70 billion. This is the highest annual purchase since registration began. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US dollar and US treasury bonds, which are both major reserve assets and sheltered haven assets. When the dollar depreciates, gold tends to rise, allowing investors and central banks to diversify their holdings in turbulent times. Gold is also inversely correlated with risky assets. A rally in the stock market tends to weaken the price of gold, while sell-offs in riskier markets support the precious metal.
The price may change due to many factors. Geopolitical instability or fear of a deep recession can quickly cause gold prices to rise due to its safe-haven status. Gold, as a non-yielding asset, tends to rise at lower interest rates, while the higher cost of money tends to weigh on the yellow metal. Despite this, most of the movements depend on the behavior of the US dollar (USD) when the asset is priced in dollars (XAU/USD). A forceful dollar tends to keep the gold price in check, while a weaker dollar will likely cause gold prices to rise.
