Gold rebounded from two-month lows near $4,366 and gained over 1.20% on Thursday, lifting XAU/USD to about $4,500 as risk appetite improved on reports of a US–Iran plan to extend a ceasefire by 60 days. Axios said Washington and Tehran had reached terms to keep the truce in place while talks proceed on Iran’s uranium enrichment programme, though the arrangement still requires approval from President Donald Trump and senior Iranian officials. The report came as the two sides exchanged fire, with Iran launching strikes against Kuwait. The US Dollar Index (DXY) eased 0.19% to 98.97.
US inflation data ran warm. Core PCE rose to 3.3% YoY in April from 3.2% in March, while headline PCE printed at 3.8% YoY versus 3.5% previously. Growth was revised lower, with Q1 2026 GDP at 1.6% versus an earlier 2% estimate, and Initial Jobless Claims ticked up to 215K for the week ending May 23, above the 211K forecast. Rate-hike expectations for 2026 were pared back to 45% for a 25-basis-point move, according to Prime Terminal, as traders awaited further Fed speeches before the blackout period. Technically, clearance of $4,500 would expose resistance near $4,575–$4,600, then the 50-day SMA at $4,630 and the 100-day SMA at $4,801; a drop below $4,450 would refocus attention on the 200-day SMA at $4,399 and $4,366. Central banks added 1,136 tonnes of gold worth around $70 billion in 2022, World Gold Council data showed.
Gold’s Rally and Central Bank Demand
We are seeing gold surge on hopes of a US-Iran peace deal, which has weakened the US Dollar. This move above $4,500 is significant, but it’s reacting more to currency fluctuations than a flight to safety. The situation remains tense, so this rally could be fragile if the deal faces hurdles or geopolitical fires resume.
The underlying support for gold remains strong due to persistent central bank demand. Data from the World Gold Council shows that central banks, particularly from emerging economies, bought a near-record 1,037 tonnes in 2023 and continued strong purchases into 2024, providing a solid floor for prices. We expect this trend to continue as nations diversify away from the dollar, making dips in gold attractive buying opportunities.
Volatility Expectations and Risk Strategies
Given the conflicting signals of a potential peace deal versus sticky inflation, we anticipate a spike in volatility. Traders should consider using options to profit from large price swings in either direction, such as a long straddle strategy involving buying both a call and a put option. This approach benefits from a significant move, regardless of whether the market focuses on the positive geopolitical news or the negative economic data.
The cooling US economic data, with Q1 GDP revised down to 1.6% and jobless claims ticking up, is the more dominant long-term factor. This weakens the case for the Federal Reserve to raise rates, with market odds for a hike now below 50%. Historically, when the market starts pricing in a Fed pivot before the Fed itself confirms it, gold begins a steady climb.
For those with a bullish bias, we should look at call options or bull call spreads to capitalize on a potential move toward the $4,575 resistance trendline. This allows us to define our risk while targeting the next technical levels if the market continues to price out Fed rate hikes. The slowing economy provides a stronger fundamental reason for gold to appreciate than the day-to-day geopolitical headlines.
However, we must remain hedged against a breakdown in talks or unexpectedly hawkish Fed commentary. Buying put options with strike prices below the $4,400 level, near the 200-day moving average, offers cheap insurance. If the price breaks below this key technical support, it could signal a rapid unwind of the recent gains.
