Gold rallied after Trump suspended Iran strikes and signaled a deal. Markets price out Fed hikes amid easing geopolitical tensions. Technical levels and risks ahead.
Geopolitical De-Escalation Drives Gold Higher
Gold prices surged on Thursday after former President Donald Trump announced the suspension of planned military action against Iran and indicated an agreement in principle was imminent. The move sparked a rapid unwinding of safe-haven demand, with the US dollar and Treasury yields declining sharply as investors adjusted expectations for Federal Reserve policy.
While optimism around a potential deal has bolstered risk appetite, market participants remain cautious given Trump’s history of contentious claims. Nonetheless, traders are scaling back aggressive short positions in gold, favoring a near-term pullback amid the de-escalation.
Fed Policy Outlook and Yield Dynamics
The abrupt shift in geopolitical risk has led to a repricing of Fed rate hike expectations. Markets now assign lower odds to a July rate increase, pressuring the dollar and pushing 10-year Treasury yields lower. However, analysts caution that sustained economic resilience could reintroduce upside risks to inflation and monetary tightening if the deal materializes.
XAUUSD Technical Analysis
Daily Timeframe: Gold is retesting a broken trendline resistance. Sellers may re-enter near current levels, with a break above targeting the 3,885 zone. Bullish momentum would require a sustained move above the 4,700 downward trendline.
4-Hour Timeframe: A minor downward trendline caps gains. Sellers maintain control unless buyers push through the trendline, opening the path to fresh highs.
1-Hour Timeframe: An upward trendline acts as near-term support. A break below could accelerate losses, while a bounce may signal a test of the 4-hour resistance.
Market Risks and Outlook
Oil prices face downward pressure if the Iran deal holds, potentially reverting to pre-tension levels. However, a shift from supply shock to demand-driven growth could reignite inflation concerns, complicating the Fed’s policy trajectory. Upcoming catalysts include the University of Michigan consumer sentiment survey, which may offer further insight into economic momentum.
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