The price of gold (XAU/USD) rallied on Friday ahead of the weekend, surpassing $4,850 and rising more than 1.50% as the U.S.-Iran conflict appears to be easing after Iran reopened the Strait of Hormuz, easing inflationary pressures around the world. Energy prices are falling, with WTI, the US crude oil benchmark, down more than 9% while the US dollar has fallen to a seven-week low.
Bullion prices rise as falling oil revives Fed hopes for 2026
News from the Middle East remains in the spotlight of market participants, who usually react strongly to newspaper headlines suggesting an end to the conflict. The source was different: Iranian Foreign Minister Abbas Araghchi, via Reuters, posted on X that the Strait was open to all commercial ships during the remaining 10-day truce agreed between Israel and Lebanon.
Trump then wrote: “IRAN JUST ANNOUNCED THAT THE IRAN STRAIT IS COMPLETELY OPEN AND READY TO CROSS.”
Still, a senior Iranian official recently told Reuters that significant differences remain between Tehran and Washington, including on nuclear issues. He warned that keeping the Strait of Hormuz open would depend on the terms of a ceasefire between Iran and the US.
Following the headlines, WTI widened its losses and at the time of writing fell over 9.50% to $81.74 per barrel.
The decline in crude oil prices prompted traders to cut Federal Reserve (Fed) prices by 14 basis points at the end of the year, according to LSEG Workspace data.
Waller Fed Becomes Hawkish; Daly sees neutral interest rates of 3%
Fed Governor Christopher Waller has said he favors keeping interest rates steady if the war leads to high inflation and a feeble labor market. San Francisco’s Mary Daly was dovish, saying policy was “somewhat restrictive” with a near-neutral interest rate of 3%, and added that she might leave rates steady. She stressed, however, that if inflation increases, she will support an raise in interest rates, while a quick end to the war in Iran will open the way to discussion cuts.
The US Dollar Index (DXY), which measures the dollar against a basket of currencies, fell to a seven-week low, down 0.17% to 98.01. Buck deepened his losses after Iran’s Strait headline amid rising hopes for a resolution to the conflict.
The 10-year U.S. Treasury yield hit its lowest level since mid-March and was last seen down 7 basis points to 4.246%.
Gold Technical Outlook: Clearing Ban $4,900, Consolidation Around $4,850-4,900
Gold faces key resistance after rebounding from daily lows at $4,767, but has failed to decisively break the 50-day uncomplicated moving average (SMA) at $4,899. At the time of writing, the XAU/USD rate has fallen below its April 8 high of $4,857, opening the door to a pullback.
Momentum is positive, as indicated by the Relative Strength Index (RSI), and is breaking out to a recent high, indicating further gains.
To return to the upside, gold needs to clear $4,900 and then $4,950 before reaching $5,000. Conversely, a drop below $4,750 and a move towards the 100-day SMA at $4,699 is predictable. Further decline is seen with the next demand zone at the 20-day SMA at $4,549.
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 employ 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 secure 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 favor 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. Still, most of the movements depend on the behavior of the US dollar (USD) when the asset is priced in dollars (XAU/USD). A robust dollar tends to keep the gold price in check, while a weaker dollar will likely cause gold prices to rise.
