Gold recovered in mid-North American trade on Thursday after Al Arabiya said a final draft of a US-Iran agreement had been reached by a Pakistani mediator and was due to be announced within a few hours. XAU/USD traded at $4,538, almost unchanged.
Iran’s ILNA said the draft includes an immediate, comprehensive ceasefire across all fronts and a pledge not to target each other’s infrastructure. It also includes freedom of navigation through the Persian Gulf and the Strait of Hormuz, lifting US sanctions on Iran, and talks on unresolved issues within seven days.
Markets React To Ceasefire Draft
Earlier reports said Iran’s supreme leader had barred enriched uranium from being shipped abroad, but Al Jazeera later denied such a directive. West Texas Intermediate fell over 2% to below $97.50, while the US Dollar Index was near flat at 99.13.
US initial jobless claims for the week ending 16 May fell to 209K from 212K, below the 210K forecast. S&P Global’s Manufacturing PMI rose from 54.5 to 55.3, a four-year high.
Fed minutes showed most members favoured holding rates or considering a rise if the energy supply shock persists. Upcoming events include University of Michigan consumer sentiment and the swearing-in of new Fed Chair Kevin Warsh.
Gold’s downtrend remains unless price clears $4,773, with RSI below 50. Support levels are $4,453, $4,400, and the 200-day SMA at $4,346; resistance is around $4,590, then $4,600, the 20-day SMA at $4,619, and the 50-day SMA at $4,678.
Trade Setup For Bearish Gold
Given the potential US-Iran agreement announced today, May 22, 2026, we see a clear signal to position for lower gold prices in the coming weeks. The removal of this major geopolitical risk reduces the need for safe-haven assets, so derivative traders should consider buying XAU/USD put options or establishing bear call spreads. These strategies would profit from gold breaking below the key $4,453 support level mentioned in the technical outlook.
The strong US economic data, like the four-year high in manufacturing PMI, reinforces this bearish view on gold. After inflation proved stubborn throughout 2025, consistently hovering above 3%, any sign of economic strength keeps pressure on the Fed to remain restrictive. Higher interest rates increase the opportunity cost of holding non-yielding gold, making it less attractive even without the war premium.
The immediate 2% drop in WTI crude oil to below $97.50 is a direct consequence of the deal, which is expected to ease supply constraints in the Persian Gulf. We saw a similar, though more gradual, effect on oil prices when the initial JCPOA framework was discussed back in 2015, suggesting this downward pressure on energy could persist. Traders could look to short oil futures or buy puts on energy sector ETFs to capitalize on this trend.
This de-escalation should also lead to a drop in overall market volatility. The VIX index, which saw elevated levels during the conflict, is likely to decline as geopolitical uncertainty fades. Selling VIX call options or other strategies that profit from falling implied volatility could be advantageous over the next few weeks.
Finally, we must closely monitor the first statements from the incoming Fed Chair, Kevin Warsh. While the current economic data and peace deal provide a clear direction, his tone on inflation and future policy will introduce a new variable. His swearing-in represents a potential shift that could either accelerate these trends or introduce new uncertainty for dollar and rate-sensitive assets.
