Gold (XAU/USD) consolidated above the $4,200 level on Friday, trading at $4,216, up 0.11%, as optimism grew around a potential US-Iran deal that could be signed next week, according to newswires [1]. Market participants are hopeful that the Islamabad Memorandum of Understanding (MOU) between Washington and Tehran could be finalized at the G7 meeting in Geneva, Switzerland, although the Iranian Foreign Ministry spokesperson stated that Iran’s decision-making bodies are still reviewing the MOU and no details can be confirmed at this time [1].
If the deal is reached, the reopening of the Strait of Hormuz is expected, which could lower energy prices and ease inflationary pressures that have concerned major central banks [1]. The Reserve Bank of Australia (RBA) and the European Central Bank (ECB) have raised rates by 75 and 25 basis points, respectively, this year, but a quick resolution to the Middle East conflict might prevent further tightening by the Reserve Bank of New Zealand (RBNZ), the Bank of England (BoE), and the Federal Reserve (Fed) [1].
Despite the optimism, US Treasury yields edged higher, with the 10-year T-note up 1.5 basis points to 4.477%, presenting a headwind for gold. The US Dollar Index (DXY) remained steady at 99.77, up 0.06% [1]. US households showed increased optimism, as the US Consumer Sentiment in June improved from 44.8 to 48.9 in the preliminary reading, and one-year inflation expectations eased from 4.8% to 4.6% [1].
Earlier in the week, US inflation data had increased speculation that the Fed might raise rates at least once this year, but the probability of a hike dropped from around 88% to 67% following news of the potential US-Iran deal [1]. Looking ahead, the market awaits the Fed’s monetary policy decision next week, the first under new Chairman Kevin Warsh, along with the release of the Summary of Economic Projections (SEP) and Retail Sales data [1].
Technically, gold’s momentum remains neutral to downward-biased, despite a 3.50% recovery on Thursday that pushed prices above $4,200. The Relative Strength Index (RSI) indicates a potential for buyers to drive prices higher in the near term, with resistance levels at $4,250 and $4,300, followed by the 200-day Simple Moving Average [1].
CONCLUSION
Gold prices are stabilizing above $4,200 as optimism over a potential US-Iran deal tempers inflation concerns and reduces expectations for further Fed rate hikes. Market participants are closely watching upcoming US economic data and the Fed’s policy decision for further direction.