Gold (XAU/USD) gathered bullish momentum and climbed to a fresh two-week high, but erased a large portion of its gains in the second half of the week. Middle East news and the impact of energy price fluctuations on inflation expectations are likely to continue influencing the precious metal’s valuation in the near future as market shifts focus to the United States (US) March inflation data.
Gold bulls remain hesitant as markets doubt a ceasefire in Middle East
Markets started the week on a cautious note as the involvement of Houthis, an Iran-backed militant group in Yemen, in the Middle East conflict by firing missiles against Israel fed into fears of a prolonged crisis in the region. After falling toward $4,420 at the weekly opening, Gold managed to recover its daily decline as market mood started to improve in the American session. US President Donald Trump said that they were in serious discussions with a “new and more reasonable regime” to end the military operations in Iran. Later in the day, White House Press Secretary Karoline Leavitt reiterated that talks were going well and noted that Iran already agreed to some of the US’s proposed points.
Early Tuesday, citing Trump administration officials, the Wall Street Journal reported that the President was considering ending the military campaign against Iran even if the Strait of Hormuz remains largely closed and plans a more complex operation to reopen it at a later date. Trump later told reporters at the White House that the US will leave Iran within two or three weeks and said that Iran doesn’t have to make a deal to end the war. Additionally, the White House announced that the US President would address the nation late Wednesday to provide an important update on the war against Iran. As risk flows dominated the action in financial markets on Tuesday and Wednesday, Gold staged a two-day recovery rally, gaining more than 5% over the period and reaching its highest level in two weeks near $4,800.
Upbeat macroeconomic data releases from the US failed to support the US Dollar (USD) and allowed XAU/USD to cling to its gains midweek. Automatic Data Processing (ADP) reported on Wednesday that employment in the private sector rose by 62K in March, beating the market expectation for an increase of 40K. Moreover, the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) improved to 52.7 in March from 52.4 in February, while the Prices Paid Index of the PMI survey, the inflation component, rose sharply to 78.3 from 70.5.
However, Trump’s remarks during his address to the nation caused investors to doubt a swift end to the Iran conflict and triggered another bout of flight-to-safety during the early Asian session on Thursday. The President said that Iran is “no longer a threat” and added that they will hit Iran “extremely hard” over the next two to three weeks. “We have not needed Hormuz Strait and we do not need it,” Trump added and argued that the Strait will open up naturally once the conflict is over. Crude Oil prices rose sharply in the immediate aftermath and revived concerns about the global inflation outlook. In turn, Gold turned south and dropped toward $4,550 before rebounding and closing above $4,675 in a shortened week due to the Good Friday holiday.
The US released the Nonfarm Payrolls (NFP) report on Friday, which showed that the country added 178K new jobs. At the same time, February’s headline was downwardly revised to -133K from an initial estimate of -92K. Also, the Unemployment Rate ticked lower to 4.3% from 4.4%, while the Labor Force Participation Rate edged marginally lower to 61.9% from 62%. Finally, wage pressures eased, with annual growth in Average Hourly Earnings down to 3.5%, from the 3.8% posted in February. The report provided USD with temporary near-term support amid reduced odds of a Federal Reserve (Fed) rate cut in 2026.
Gold investors need clarity on the Middle East conflict before committing to a steady recovery
The US economic calendar will feature the ISM Services PMI report for March on Monday. Unless the headline PMI unexpectedly drops into the contraction territory below 50, this report is unlikely to have a significant impact on Gold’s valuation.
On Wednesday, the Fed will publish the minutes of the March monetary policy meeting. The revised Summary of Economic Projections (SEP) after the meeting showed that policymakers’ median projection pointed to a 25 basis-point rate cut in 2026. In case the publication suggests that Fed officials keep an open mind about tightening the policy in response to rising inflation, due to a prolonged conflict in the Middle East, Gold could come under renewed selling pressure. Conversely, XAU/USD could edge higher if policy discussions are more focused on supporting the labor market.
The US Bureau of Labor Statistics (BLS) will publish the Consumer Price Index (CPI) data for March on Friday, providing the first glimpse into inflation dynamics in the face of rising energy prices. According to the CME FedWatch Tool, markets are currently pricing in about an 83% chance that the Fed policy rate will remain unchanged at 3.5%-3.75% by end-2026. A strong inflation print could cause market participants to reconsider the probability of an interest-rate hike by the Fed. Hence, a significant upside surprise in the monthly CPI reading could boost the USD and weigh on XAU/USD.
Investors will continue to pay close attention to news coming out of the Middle East while assessing the US economic data. A further widening of the conflict, with the US ramping up attacks against Iran, or preparing for a ground invasion, and Iran retaliating, could keep Gold under bearish pressure. On Thursday, Iran’s Islamic Revolutionary Guard Corps said that they targeted US-linked steel and aluminum facilities in Gulf states in response to attacks against Iranian industries.
On the other hand, Gold’s recent action reaffirmed that buyers are quick to react to any developments that hint at a potential de-escalation. It is a tough order to guess what President Trump could say or order next. If he abruptly pulls the US military out of the region and claims victory in their mission, Gold could turn north and register strong gains. Still, it could be risky to bet on a steady rally in Gold prices until there is confirmation of a resolution from all sides involved in the conflict.
Gold technical analysis highlights a lack of buyer interest
Gold failed to stabilize above the 20-day Simple Moving Average (SMA) and the Relative Strength Index (RSI) indicator on the daily chart turned south after testing the 50 line, highlighting buyers’ hesitancy.
On the downside, $4,500 (Fibonacci 61.8% retracement of the November-February uptrend) aligns as an interim support. In case Gold drops below this level and confirms it as resistance, $4,240 (Fibonacci 78.6% retracement) could be seen as the next support before $4,140 (200-day SMA).
On the flip side, Gold faces a pivot area at $4,650-$4,680, where the 100-day SMA and the Fibonacci 50% retracement level converge. Above this region, the 20-day SMA, currently located at $4,780, could act as an interim resistance level ahead of $4,860 (Fibonacci 38.2% retracement) and $4,950 (50-day SMA).
