Gold (XAU/USD) was steady on Thursday and stayed within its range from the past week, as markets watched a meeting between US President Donald Trump and Chinese President Xi Jinping. US-Iran talks remained unresolved.
XAU/USD traded near $4,700 after reaching a three-week high of about $4,773 on Tuesday. Expectations that the Federal Reserve may keep rates higher for longer reduced demand for further gains.
Recent US inflation data pointed to higher energy costs linked to the Middle East war for a second month. Traders increased expectations of a US rate rise by year-end, alongside firm labour conditions.
Higher rate expectations lifted US Treasury yields and the US Dollar, limiting gains in the non-yielding metal. The US Dollar Index (DXY) traded near 98.54, close to a more than one-week high.
Boston Fed President Susan Collins said it is possible rates may need to rise and policy may stay restrictive “for some time”. She said job growth has been near the breakeven rate and unemployment remains “relatively low”.
Trump’s two-day summit in Beijing covered trade, Taiwan, and the war in Iran, according to a White House readout cited by Reuters. The readout said the leaders discussed market access, Chinese investment in the US, keeping the Strait of Hormuz open, and preventing Iran from obtaining a nuclear weapon.
Technically, gold held above the 21-day SMA near $4,684 but below the 50-day SMA around $4,740. The 200-day SMA was near $4,341, RSI was around 50, and resistance sat near $4,850, with support at $4,500.
Looking back to this time in 2025, we saw gold stuck in a tight range as traders balanced geopolitical risks against a hawkish Federal Reserve. The high-stakes meetings between the US and China, along with the Iran situation, created uncertainty that kept the price consolidating around the $4,700 level. This period was defined by investor caution and sideways price action.
Today, the landscape is quite different, as the Fed’s aggressive stance from last year has successfully cooled inflation. April’s CPI data showed core inflation falling to 2.8%, its lowest level in two years. Consequently, fed fund futures are now pricing in a 75% probability of a rate cut by the third quarter of this year.
This policy shift has pressured the US Dollar, which we see trading near 94.20, well below the 98.54 peak we observed during the geopolitical tensions of 2025. The weakening dollar backdrop creates a more favorable environment for non-yielding assets. This has helped gold break decisively above the old $4,850 resistance level mentioned last year.
Given this evolving macroeconomic picture, we believe traders should consider positioning for further upside in gold. Buying call options with strike prices above the current $5,150 level could capture gains if the Fed confirms its dovish tilt in the coming meetings. This strategy allows for leveraged exposure while defining risk to the premium paid.
However, the geopolitical environment, particularly concerning US-China tech competition, remains a source of potential volatility. To hedge against sudden risk-off moves, employing long straddles around key economic data releases or diplomatic meetings could be prudent. This would profit from a large price swing in either direction, protecting against unforeseen shocks.
The decline in real yields is another critical factor supporting our view. Unlike in 2025 when rising Treasury yields capped gold’s upside, the 10-year Treasury yield has since fallen by over 50 basis points in 2026. This reduces the opportunity cost of holding gold, making it more attractive relative to bonds.
