International gold prices held within a narrow range during the Asian trading session on Thursday, with XAU/USD trading around $4560 as the market entered a state of cautious watchfulness. Investors are closely monitoring the stalled peace talks between the United States and Iran, while also paying close attention to the latest signals from the Federal Reserve regarding its future interest rate path. Against a backdrop of simultaneous geopolitical risks and high interest rate expectations, the gold market is currently caught in a short-term directional tug-of-war.
U.S. President Donald Trump stated on Wednesday that negotiations with Iran have entered the "final stage," a comment initially interpreted by markets as a sign that both sides might be nearing an agreement, leading to a brief uptick in risk appetite. However, Trump also emphasized that if Iran fails to accept the relevant conditions, the U.S. will resume military operations in the coming days. This contradictory messaging caused a rapid swing in market risk sentiment, prompting investors to reassess the potential for a Middle East escalation to disrupt global energy supplies.
Market concerns remain primarily focused on the Strait of Hormuz. This critical waterway handles approximately 20% of the world's seaborne crude oil shipments. Any disruption to this flow could push international oil prices higher, exacerbating global inflationary pressures. As gold is traditionally viewed as a key asset for hedging against both geopolitical and inflationary risks, the ongoing uncertainty in the Middle East continues to provide underlying support for its price.
David Meger, Director of Metals Trading at High Ridge Futures, noted that if signs of a de-escalation in Middle East conflicts emerge, or if the Strait of Hormuz returns to stable and open operations, markets would anticipate a potential gradual decline in global interest rates, which would be a long-term positive for gold. However, until the situation becomes clearer, safe-haven demand is likely to continue driving capital into the precious metals sector.
Simultaneously, the minutes from the Federal Reserve's April Federal Open Market Committee (FOMC) meeting served as another key market driver. The minutes revealed that most Fed officials are concerned about inflation persistently exceeding the 2% target and believe that if future price pressures continue to build, the Fed may need to reconsider its interest rate path. This stance has significantly reinforced market expectations for "higher-for-longer" interest rates.
The minutes also pointed out that the Middle East conflict, by driving up energy prices, is further exacerbating inflationary risks within the United States. At the April policy meeting, the Fed decided to keep the federal funds rate unchanged in the 3.5%-3.75% range, but officials showed markedly increased vigilance regarding future inflation trends. Consequently, U.S. Treasury yields have remained elevated, and the U.S. dollar index has generally held firm, exerting some downward pressure on gold.
From a market sentiment perspective, gold is currently in a classic "dual-factor driven" environment. On one hand, geopolitical risks and safe-haven demand are supporting prices at elevated levels. On the other hand, the Fed's hawkish stance and rising U.S. real yields are limiting the scope for further rapid price appreciation. Therefore, investors are awaiting more economic data and greater clarity on the Middle East situation.
Market focus is now shifting to the preliminary U.S. May Markit Purchasing Managers' Index (PMI) data, scheduled for release on Thursday evening. If the data indicates continued resilience in U.S. economic activity, markets may further scale back bets on Fed rate cuts, potentially pushing the dollar stronger and capping gold's short-term performance. Conversely, if the PMI data shows a noticeable slowdown, it could reignite market expectations for rate cuts, potentially propelling gold to test higher levels again.
From a technical perspective, the daily chart for gold still shows a clear bullish trend. The price has recently held firmly above the key $4500 level, indicating that medium-to-long-term buying interest remains strong. The immediate resistance level is around $4580. A sustained break above this zone could pave the way for a further test of the $4600 level. Key support levels lie at $4480 and $4450. As long as the price remains above this range, the medium-to-long-term upward structure remains intact.
The 4-hour chart shows that gold has recently entered a phase of high-level consolidation. Short-term moving averages are beginning to flatten, and the momentum of the MACD indicator has slowed, suggesting a cooling in the short-term bullish momentum. However, the RSI indicator remains above 50, indicating that overall market sentiment is still biased towards strength. If the Middle East situation deteriorates further, gold could potentially resume its breakout pattern. Conversely, if U.S. economic data remains robust and markets continue to bet on the Fed maintaining high rates, gold prices could face pressure for a technical correction.
Overall, the core logic driving the current gold market revolves around "geopolitical risk" and the "Federal Reserve's policy path." As long as global risk aversion sentiment has not significantly subsided, downside support for gold is expected to remain solid. However, the high-interest-rate environment also suggests that gold may struggle to stage a rapid, one-sided rally in the short term.
The gold market is currently in a sensitive, high-level phase, marked by a clear tug-of-war between Middle East uncertainty and expectations for a hawkish Fed policy stance. Risks surrounding the Strait of Hormuz continue to amplify market concerns about energy supply and global inflation, providing long-term safe-haven support for gold. However, the Fed meeting minutes show officials remain highly vigilant on inflation, suggesting the high-rate environment could persist longer, thereby capping gold's upside potential. Going forward, markets need to closely monitor changes in U.S. economic data, developments in the Middle East situation, and subsequent statements from Fed officials. If the U.S. economy begins to slow while geopolitical risks remain elevated, gold could challenge historical highs again. However, if the U.S. economy maintains resilience and the Fed sticks to its hawkish stance, gold may enter a phase of wide-ranging, high-level consolidation.
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