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Gold Strikes Gains Amid US-Iran Ceasefire
On Wednesday, gold (XAU/USD) showed a positive movement, trading at $4,735—a rise of over 0.70%—though it fell from an earlier peak of $4,857, which marked a three-week high. The decline in oil prices has adversely affected the US dollar, which is at its weakest in four weeks according to the US Dollar Index (DXY).
Bullion’s Resilience as Inflation Fears Moderated the Greenback
Early this week, US and Iranian officials reached a tentative two-week ceasefire aimed at curtailing ongoing hostilities—with discussions scheduled in Pakistan this Friday. US President Donald Trump announced that the truce hinges on Iran reopening the Strait of Hormuz, asserting that the US has met its military goals. In exchange, Iran proposed a 10-point negotiation framework, which Trump deems a suitable starting point.
Despite the ceasefire, tensions linger in the Middle East, particularly with Israel striking Hezbollah positions in Lebanon. Concurrently, both Kuwait and Saudi Arabia reported damages to energy facilities attributed to Iranian attacks.
The Iranian President, Masoud Pezeshkian, has indicated that a ceasefire in Lebanon is essential within the 10-point US framework. Although the Strait of Hormuz remains closed as an act of retaliation for Israel’s actions, a senior Iranian official hinted it could reopen by Thursday or Friday if negotiations prove successful.
As a consequence of the ceasefire announcement, market sentiment improved, causing West Texas Intermediate (WTI) oil prices to drop nearly 14%, falling below $95 per barrel. The DXY also declined by 0.60% to 98.91 as fears of a new wave of inflation linked to ongoing geopolitical tensions eased.
Federal Reserve Rate Predictions
As ongoing energy disruptions have alleviated inflation fears at a global level, expectations surrounding the Federal Reserve’s monetary policy have shifted. Prior to the US-Iran ceasefire announcement, markets anticipated that the Fed would maintain current interest rates. However, with talks now underway, investors are factoring in nearly 10 basis points of possible easing by the end of the year.
Upcoming US releases will be closely monitored, including jobless claims, the final Q4 2025 GDP report, and the Core Personal Consumption Expenditures (PCE) Price Index—often viewed as the Fed’s preferred measure of inflation.
Technical Outlook for XAU/USD
Currently, the technical analysis suggests a bullish environment for gold, but the prospects could change if the daily close fails to surpass the 50-day Simple Moving Average (SMA) at $4,779. A dip below this threshold could signal a more significant retracement towards the 20-day SMA at $4,723.
While the Relative Strength Index (RSI) suggests ongoing upward momentum, there are risks of volatility, particularly due to uncertainties surrounding the Middle East ceasefire. Should oil prices rally, XAU/USD may experience downward pressure.
On the downside, if XAU/USD falls beneath $4,700, the next significant support level is likely to be the 100-day SMA at $4,620, with an even lower target near the April 2 low of $4,554.
Key Takeaways on Gold as an Asset
Gold has traditionally served as a store of value, offering security during market turmoil. Presently, it is also considered a hedge against inflation and currency depreciation, untethered to any particular government’s fiscal health.
Central banks remain the largest holders of gold, utilising it to bolster their currencies during challenging economic periods. In 2022, central banks added 1,136 tonnes of gold—valued at approximately $70 billion—to their reserves, marking a historic high in purchases.
There is an inverse relationship between gold and the US dollar; typically, a depreciating dollar sees gold prices increase. Conversely, gold’s value can be impacted by geopolitical tensions or economic downturns, with its price climbing amid lower interest rates and falling during periods of higher borrowing costs.
In summary, while current trends indicate a positive trajectory for gold, market developments—including geopolitical shifts and monetary policy updates—will be crucial in shaping future price movements.
