On Thursday, spot gold prices moved higher, currently trading above $4,460 per ounce. The rebound in the precious metal's price was primarily driven by a dip in the safe-haven US dollar, following news of a ceasefire between Israel and Lebanon. However, the ongoing stalemate in US-Iran tensions means a geopolitical risk premium persists, limiting further potential weakness for the dollar. Concurrently, expectations for Federal Reserve interest rate hikes continue to support dollar bulls, which may cap the upside for this non-yielding asset.
Ceasefire Agreement Lifts Gold
Israel and Lebanon agreed to implement a ceasefire on Wednesday following US-led talks in Washington. A joint statement indicated the truce is contingent upon a complete cessation of attacks by the Iran-backed Hezbollah and the withdrawal of its armed personnel from southern Lebanon.
Simultaneously, the US House of Representatives passed a resolution seeking to prevent President Trump from taking further military action against Iran.
These developments have raised hopes for an end to the three-month-long conflict involving the US and Israel against Iran, prompting a modest pullback in the US dollar after it surged to its highest level since April 7 overnight. This provided support for gold to rebound from a one-week low. Nevertheless, the implementation of the ceasefire remains uncertain, and the improvement in market sentiment may be temporary.
US-Iran Talks at an Impasse, Geopolitical Risks Persist
According to media reports, diplomatic contacts between the US and Iran have encountered obstacles, with Iran insisting on the immediate unfreezing of funds at the outset of negotiations.
Senior US officials have firmly stated that no funds will be unfrozen initially unless Iran takes concrete actions regarding nuclear issues and passage rights in the Strait of Hormuz. This deadlock has tempered the market's recent optimism. The lingering geopolitical risk premium has limited the scope for further dollar retracement.
Furthermore, combined with market expectations for a hawkish Federal Reserve stance, dollar bears are hesitant to place large bets. This, in turn, restricts the potential for further gains in the gold price.
Gold faces dual pressures: persistent US-Iran disagreements have not yet triggered large-scale safe-haven buying, while ongoing rate hike expectations continue to dampen the appeal of non-yielding assets. The gold price remains well below the psychological $4,500 per ounce level.
Market Focus Shifts to Employment Data and Fed Speeches
Traders are now focusing on the US weekly initial jobless claims data and speeches from FOMC members due later in the North American session. An unexpected rise in claims or dovish signals from officials could weaken Fed rate hike expectations, providing support for gold. Conversely, strong data or hawkish commentary would benefit the dollar and weigh on gold.
However, market attention remains firmly on Friday's non-farm payrolls report, which will offer clearer clues on the Fed's policy path. Strong data would reinforce rate hike expectations, negatively impacting gold. Weaker-than-expected data could trigger a dollar pullback and boost gold prices.
Additionally, the latest geopolitical developments, such as updates on US-Iran talks and ceasefire implementation, may continue to inject volatility into the markets, serving as an extra variable influencing short-term movements in the dollar and gold.
On the daily chart, spot gold entered a corrective phase after previously rallying to a high of $5,596.33. The price is currently trading around $4,460, below the short-term MA20 and MA50 moving averages, while finding support from the long-term MA200 at $4,422.53. It faces short-term resistance in the $4,556-$4,628 range, with a key resistance level above at $4,691. Support below is seen at the previous low of $4,366.52 and the MA200. The larger cycle remains in a high-level consolidation pattern following the prior uptrend.
The MACD lines are below the zero line with small green bars, indicating short-term weakness but no sustained downward momentum. The RSI reading of 42.32 is in a neutral zone, not yet triggering oversold conditions. The short-term trend maintains a weak consolidation bias. A sustained move above the short-term moving averages is needed to signal a rebound, while a break below the MA200 would open the door for further downside.
As of the latest update, spot gold was quoted at $4,431.60 per ounce.
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