Gold Market Sees Significant Buying Surge
The gold market has experienced a robust wave of buying since the week began, with prices climbing over 3% during early North American trading.
This uptick represents the highest increase in precious metals since early February, with spot gold trading at around $4,351 per ounce.
Market analysts suggest that gold’s rise is linked to news about a potential peace deal between the United States and Iran, anticipated to be signed on Friday. This development has pushed oil prices down below $80 per barrel, helping to ease inflation worries.
Gold has strongly rebounded from the lows seen last week, where it hovered around $4,000 an ounce. However, some experts caution that the precious metal still faces challenges ahead. Despite the recovery on Monday, it remains below its 200-day moving average.
Michele Schneider, chief market strategist at Market Gauge, mentioned in a recent chat that gold’s ability to maintain support above $4,000 could encourage investors to test the waters with small positions. However, he’d prefer to see it surpass the 200-day moving average, now sitting at about $4,450 per ounce.
David Morrison, senior market analyst at Trade Nation, pointed out that, although gold has managed to maintain support at a key psychological level, much could still change before the expected peace agreement on Friday. He highlighted the risk of something occurring that could delay the signing, potentially leading to another test of the $4,000 resistance.
Furthermore, other analysts caution that despite a generally positive outlook, inflation still poses challenges for gold. Nick Corey, contributing analyst at Salomon Global, expressed in a note that anticipation is building around insights from the new Federal Reserve Chairman, Kevin Warsh, especially as markets factor in potential rate hikes by year’s end.
If Warsh indicates a readiness to overlook current inflation levels—possibly leveraging the peace deal as a means for disinflation—interest-rate-sensitive markets could benefit significantly, Corey noted.
Kawley also observed that while gold is rallying, it still encounters notable technical resistance. For instance, spot prices need to break decisively above the 50-day simple moving average, currently at $4,581 per ounce. Additionally, the key resistance point at the May 12 low of $4,773 per ounce is crucial; a clean breakout could pave the way for a more extended rally. Now, with the political landscape improving, focus shifts to the Fed’s actions.
Commodity analysts at TD Securities expressed optimism about gold and silver but advised investors to remain vigilant regarding the oil market, given the rising prices that contribute to inflation concerns.
They indicated that with interest rates still anticipated to increase by early 2027 and energy markets expected to remain tight, any recovery in precious metals might be fleeting.
Société Générale analysts cautioned investors about the drawdown on global oil stocks, which governments use to mitigate the effects of supply disruptions, highlighting that this will still affect oil prices and inflation, even post-conflict.
They mentioned that even when supplies return, the system will likely remain constrained for a while, causing prices to be highly responsive to further disruptions. This is evident in the forward curve, which will probably shift into deeper backwardation as immediate shortages escalate. The analysts also noted that with low inventories and gradual rebuilding, even small disruptions could lead to unusual price movements, perpetuating volatility in the oil market.
In this atmosphere, the French bank mentioned its intention to maintain a neutral stance on gold in the short term, as rising real yields overshadow the persistent inflation, limiting gold’s appeal both as an inflation hedge and as a defensive asset.
