Gold (XAU/USD) remained confined within its weekly trading range on Friday, trading around $4,517 and poised for a second consecutive weekly decline as investors closely monitored ongoing indirect negotiations between the United States and Iran aimed at ending the Middle East conflict [1]. Despite Pakistani mediation and meetings between Iranian Foreign Minister Abbas Araghchi and Pakistani Interior Minister Mohsin Naqvi, major disagreements persist, particularly regarding Iran’s uranium enrichment program and control over the Strait of Hormuz. A senior Iranian source stated, 'no deal has been reached yet, but gaps have narrowed' [1].
Iran and Oman are considering a toll system for vessels transiting the Strait of Hormuz, a proposal opposed by US President Donald Trump, who emphasized, 'We want it open, we want it free, we don’t want tolls,' and warned that Iran 'will not get a nuclear weapon or we’ll do something drastic' [1]. Cautious optimism over the negotiations improved market sentiment, leading to a slight pullback in oil prices and a pause in the recent surge of US Treasury yields, with the benchmark 10-year yield easing toward 4.560% after reaching a 16-month high of 4.687% earlier in the week [1].
However, both sources highlight that hawkish Federal Reserve expectations and a stronger US Dollar continue to act as headwinds for gold. Commerzbank’s Thu Lan Nguyen noted that gold briefly slipped below $4,500 per ounce as markets priced in a prolonged Iran conflict and sharply higher US rate expectations [2]. The anticipation of US rate cuts has largely been removed, with the possibility of rate hikes now being discussed following a sharp rise in US producer prices in April and hawkish Fed meeting minutes, which indicated that further hikes would be considered if inflation remains above the 2% target [2]. Richmond Fed President Thomas Barkin echoed this sentiment, stating that current policy is 'in a good place to respond to ongoing shocks,' but expressed nervousness about risks on both sides of the mandate [1].
Technically, XAU/USD is holding above the 200-day Simple Moving Average near $4,375 but remains capped below the 100-day SMA around $4,798, with the Relative Strength Index at 40 and the MACD in negative territory, signaling soft momentum and a neutral-to-slightly-bearish tone [1]. Commerzbank warns that the potential for a setback in gold prices is rising if Middle East tensions escalate again, given the current reassessment of Fed policy [2].
Traders are also awaiting the University of Michigan’s Consumer Sentiment and Inflation Expectations survey for further market direction [1].
CONCLUSION
Gold prices are under pressure from rising US rate hike expectations and persistent geopolitical risks, despite some cautious optimism around US-Iran negotiations. Technical indicators and analyst commentary suggest a neutral to slightly bearish outlook, with the potential for further declines if Middle East tensions intensify or inflation remains elevated.