Gold rose 0.7% to about $4,530 in European trading on Friday, extending a rebound as oil retreated on renewed hopes of a US-Iran peace arrangement. WTI was down 1.6% at a five-week low near $86.30 after Axios reported a 60-day Memorandum of Understanding that would allow “unrestricted” energy flows through the Strait of Hormuz, a route for almost 20% of global supply, and lift the US blockade on Iranian seaports; the plan still requires President Donald Trump’s approval. Markets have pared expectations for further Federal Reserve tightening, pricing a 44% chance of higher rates by December, down from nearly 62% a week earlier, after higher oil had previously kept inflation concerns elevated.
Technically, XAU/USD remains below the 20-day EMA at roughly $4,572, while the 14-day RSI near 45 points to subdued bearish momentum. A move above $4,572 would shift focus to the May 15 high at $4,665, whereas a drop beneath the May 28 low at $4,366 could expose $4,300. Goldman Sachs expects Brent and WTI to hold around $80 and $75 a barrel through 2027, and sees the implied path as almost 30% above pre-war levels. Separately, central banks added 1,136 tonnes of gold worth about $70bn in 2022, according to the World Gold Council.
Market Dynamics and Trading Scenarios
We see the market hanging on a single decision: President Trump’s approval of the US-Iran framework. This creates a binary event for oil prices, which will directly impact inflation expectations and Federal Reserve policy. Derivative traders should prepare for a sharp move in gold, as the current price near $4,530 does not reflect the deal’s final outcome.
If the deal is approved, we anticipate oil prices will continue their slide, further easing inflation fears. This view is supported by this morning’s Core PCE data, which showed a slight cooling to a 3.1% annual rate. A sustained drop in energy costs would likely take Fed rate hikes off the table, making non-yielding gold more attractive.
In this scenario, we would look to position for a break above the key resistance at the 20-day EMA near $4,572. Buying call options with a strike price around $4,600 could offer leveraged exposure to an upward move toward the $4,665 target. This strategy would limit downside risk if the news turns negative.
Conversely, a rejection of the deal would immediately reintroduce geopolitical risk and send oil prices sharply higher. According to the CME FedWatch Tool, markets are still pricing a 44% chance of a rate hike by December, and this probability would surge. A more hawkish Fed would strengthen the dollar and likely push gold down through its recent support at $4,366.
For this outcome, buying put options with a strike below the $4,366 level would be a way to position for a slide towards $4,300. Given the high degree of uncertainty, we note the CBOE Gold Volatility Index (GVZ) has risen this week, indicating options are pricing in a larger-than-usual move. A straddle strategy, buying both a call and a put, could therefore be effective to trade the volatility itself.
Gold’s Long-Term Support and Outlook
Beyond this immediate catalyst, we see a strong fundamental floor for gold prices. The latest World Gold Council report for Q1 2026 showed central banks continued their strong buying trend, adding another 290 tonnes to global reserves. This persistent demand provides a long-term supportive backdrop against any sharp, policy-driven sell-offs.
