Gold (XAU/USD) rose for a second day and reached an over one-week high above $4,680 in early European trading on Wednesday. It rebounded from a more than one-month low near $4,500 set on Monday as the US Dollar weakened and crude oil fell.
US President Donald Trump said “Project Freedom”, covering ship movements through the Strait of Hormuz, would be paused briefly to allow time for a deal with Iran. He also said on Truth Social that progress had been made towards an agreement, while Pete Hegseth said the ceasefire holds for now and Marco Rubio said Operation Epic Fury launched with Israel on 28 February is over.
Market Drivers And Fed Expectations
Lower oil prices reduced inflation fears and eased expectations for higher US rates, supporting gold. CME Group’s FedWatch Tool still shows over a 35% probability of a US rate rise by year-end, which may limit further USD falls and cap gold gains.
Traders are watching the US ADP private employment report later on Wednesday and US Nonfarm Payrolls on Friday, plus FOMC speeches and geopolitics. Technically, gold moved above $4,600 and the 200-period SMA at $4,651.69, with RSI near 59 and a rising MACD histogram.
Support levels are $4,588.83, $4,495.62, and $4,402.41. A break below $4,402.41 would turn the near-term bias lower.
Looking back to that period in 2025, we saw gold rally toward $4,700 on hopes of a US-Iran peace deal that ultimately materialized. That de-escalation took significant geopolitical risk off the table and, along with a less aggressive Federal Reserve, capped the precious metal’s rally for the remainder of that year. The focus for gold has since shifted from Middle East tensions to central bank policy and new geopolitical frictions.
How The Backdrop Has Changed
Today, the landscape is very different as we are now seeing renewed safe-haven demand, but for other reasons. Heightened tensions in the South China Sea are creating a new axis of uncertainty, pushing capital towards traditional safe havens like gold. Unlike the situation in 2025, this is not being offset by a weakening dollar, as the dollar is also catching a bid due to its own safe-haven status.
The current economic data creates a complex picture for rate-setters, which is a key driver for non-yielding gold. We just saw the April jobs report show a cooling but still solid labor market, with nonfarm payrolls coming in at 175,000, which was below expectations. Meanwhile, the latest Consumer Price Index data shows core inflation remains stubbornly above the Fed’s target at 3.6% year-over-year, keeping policymakers cautious.
This combination of geopolitical anxiety and economic uncertainty suggests that volatility is the main factor to consider now. Derivative traders should look at strategies that profit from sharp price swings, rather than picking a specific direction. Implied volatility on gold options has been climbing, with the Cboe Gold ETF Volatility Index (GVZ) ticking up to 16.5, suggesting the market is bracing for a significant move.
For those setting directional plays, the technical levels we are watching today are quite different from those in 2025. Gold is currently struggling with resistance around the $3,150 level, which has capped several rallies this year. On the downside, strong support sits near the 50-day moving average at $3,075, a break of which could signal a deeper correction.
