Gold rallied above $4,350 an ounce at the start of the week, gaining more than 3% in early North American trading as spot prices reached $4,351. The surge followed news that the U.S. and Iran will sign a peace deal on Friday, ending months of Middle East conflict. Oil prices dropped below $80 a barrel in response, easing inflation pressures that had weighed on the precious metal.
The precious metal posted its strongest percentage gains since early February. Despite the recovery from last week's lows near $4,000 an ounce, gold remains below its 200-day moving average, which analysts view as a critical technical threshold.
U.S.-Iran Peace Deal Drives Gold Rally and Oil Price Drop
The U.S. and Iran will sign a peace deal on Friday, according to reports cited by analysts. The agreement ends the latest months-long conflict in the Middle East. Oil prices fell below $80 a barrel following the announcement, reducing inflation concerns that had pressured gold in recent weeks.
David Morrison, Senior Market Analyst at Trade Nation, noted that gold passed a key psychological support level at $4,000 but cautioned that developments before Friday's signing could affect prices. "The danger this week is that something happens to delay the signing of the treaty on Friday. If that were to happen, then $4,000 could get tested once again," he said.
Analysts Identify Technical Resistance Levels Above $4,350
Michele Schneider, Chief Market Strategist at MarketGauge, told Kitco News that gold's ability to hold support above $4,000 warrants testing the market with small positions. She added that she would like to see prices push back above their 200-day moving average, which currently comes in around $4,450 an ounce.
Nick Cawley, Contributing Analyst at Solomon Global, wrote in a note to Kitco News that the spot price needs to push decisively above the 50-day simple moving average, currently sitting at $4,581/oz. "Beyond that, the May 12 lower high at $4,773/oz. represents the next significant resistance level. A clean break above both would open the door to a more sustained move higher. With the political background improving, attention now shifts squarely to the Federal Reserve," he said.
Inflation and Federal Reserve Policy Remain Key Concerns
Markets will focus on comments from new Federal Reserve Chair Kevin Warsh as rate hike expectations persist. Markets continue to price in rate hikes by early 2027, according to Cawley. "Should Warsh signal a willingness to look past current inflation levels, perhaps framing the peace deal as a disinflationary tailwind, rate-sensitive markets could receive a meaningful secondary boost," he said.
Commodity analysts at TD Securities wrote Monday that while they are optimistic on gold and silver, investors still need to pay attention to the oil market, as elevated prices continue to drive inflation fears. "With rates still pricing in a hike by early 2027 and energy markets set to remain tight, the recovery across precious metals could be somewhat temporary," the analysts said.
Société Générale warned that drawdowns of global oil inventories used to limit supply disruption impacts will continue to affect oil prices and inflation even after the conflict officially ends. "Even after supply returns, the system remains tight for an extended period, leaving prices highly sensitive to any incremental disruption. This is reflected in the forward curve, which shifts into deeper backwardation as prompt scarcity intensifies," the analysts said. "The central implication is that inventories have become the critical shock absorber and now the primary source of risk. With stocks low and rebuilding gradual, even a modest additional disruption could trigger outsized price moves, keeping volatility and risk premia structurally embedded in oil markets."
The French bank said it remains neutral on gold in the near term. "The dominant force remains elevated real yields, which continue to cap upside despite persistent inflation, limiting gold's appeal as both an inflation hedge and a defensive asset," the analysts said.
FAQ
What caused gold to rally above $4,350 this week?
Gold rallied more than 3% to $4,351 an ounce following news that the U.S. and Iran will sign a peace deal on Friday. The agreement drove oil prices below $80 a barrel, easing inflation pressures.
What technical levels do analysts see as key resistance for gold?
Analysts identify the 200-day moving average at approximately $4,450 an ounce, the 50-day simple moving average at $4,581/oz, and the May 12 lower high at $4,773/oz as significant resistance levels gold must break above for sustained gains.
How does the Federal Reserve factor into gold's outlook?
Markets are pricing in a rate hike by early 2027. Analysts say comments from new Fed Chair Kevin Warsh on inflation and the peace deal's disinflationary impact will influence rate-sensitive markets and gold's appeal as an inflation hedge.
