Gold (XAU/USD) rallied by over 1.30% on Monday, trading at $4,570 after rebounding from daily lows of $4,519, amid thin liquidity due to the US Memorial Day holiday. The positive sentiment was supported by rising US equity futures reaching new all-time highs and a sharp decline in the US Dollar, with the Dollar Index (DXY) falling 0.32% to near 99.00. The US crude oil benchmark, WTI, dropped more than 6% to $91.00 per barrel following reports that US President Donald Trump stated negotiations with Iran are 'proceeding nicely' [1].
Geopolitical developments were central to market moves, as Nikkei reported that Iran would reopen the Strait of Hormuz after Washington and Tehran reached a deal to extend a ceasefire for 60 days, pending approval from Iranian Supreme Leader Ayatollah Mojtaba Khamenei. Under the agreement, Iran would clear mines from the Strait within 30 days, restore passage for all ships, and end transit fees. Nuclear talks are set to resume during the ceasefire, while the US would gradually ease sanctions on Iranian assets [1].
These headlines reduced expectations for a Federal Reserve rate hike in 2026, despite most Fed board members indicating a preference to hold or raise rates due to ongoing inflationary pressures from the Middle East conflict. The probability of a Fed rate hike by December stands at 50%, according to Prime Terminal data. Last Friday, Fed Governor Christopher Waller stated he does not support a rate change now but wants to remove the easing bias from the Fed's statement, emphasizing he would back a hike if inflation expectations rise, and called talk of rate cuts 'crazy' [1].
Technically, gold has established support near $4,450, cleared $4,500, and is poised to challenge the $4,600 level. The Relative Strength Index (RSI) remains bearish but is rising, suggesting buyers are gaining momentum. If XAU/USD surpasses $4,600, the next resistance levels are the 20-day SMA at $4,603, the 50-day SMA at $4,657, and potentially $4,700. On the downside, support levels are at $4,550, $4,500, $4,450, and further down at $4,400 and the 200-day moving average [1].
This week, key US economic data releases include housing data, Durable Goods Orders, the second estimate of Q1 2026 GDP, jobs data, and the Fed’s preferred inflation measure, the Core PCE Price Index [1].
CONCLUSION
Gold's rally above 1.3% was driven by optimism over US-Iran negotiations and a weaker US Dollar, with technicals suggesting further upside toward $4,600. Market focus now shifts to upcoming US economic data and Fed policy signals, as geopolitical developments continue to influence sentiment.