Gold stayed under $4,800 for a third day on Friday in early European trading. Diplomatic activity on the Middle East conflict continued, while US-Iran friction remained due to an American naval blockade of Iranian ports, supporting the US dollar and weighing on gold.
A 10-day truce between Israel and Lebanon improved risk sentiment. US President Donald Trump said on Thursday that Iran was close to a deal, and the Wall Street Journal reported the two sides agreed in principle to hold fresh talks, with no time or venue set.
US PPI data earlier this week reduced inflation worries linked to higher energy prices. Traders are pricing about a 30% chance of a Federal Reserve rate cut by year-end, which has limited the dollar’s rebound from its lowest level since late February and helped gold recover from $4,768–$4,767.
No major US data is due on Friday, so attention turns to speeches from key FOMC members. Markets are also watching for possible US-Iran talks this weekend, and the pair is still on course for modest gains for a fourth straight week.
Technically, gold failed to clear the 200-period 4-hour SMA and needs follow-through selling below $4,765 to add downside pressure. RSI is near 50, MACD is below zero, resistance sits near $4,814 and $4,912, while support levels include $4,759, $4,606, and $4,416.
Given the conflicting signals, we see gold caught between a strong US Dollar and the possibility of de-escalation in the Middle East. The ongoing naval blockade of Iran keeps the dollar bid as a safe haven, which is a headwind for gold prices. However, the planned peace talks this weekend could sharply reverse that sentiment, making directional bets risky.
For derivative traders, this suggests focusing on volatility rather than direction over the next couple of weeks. The CBOE Gold Volatility Index (GVZ) has already ticked up to 21.5, reflecting the market’s nervousness ahead of the potential US-Iran talks. We believe options strategies like long straddles could be useful to capitalize on a significant price move, regardless of whether it’s up or down.
The softer Producer Price Index data we saw earlier in the week has reinforced our view that the Federal Reserve will remain on hold. Looking back at the latest CFTC data released last Tuesday, we noted that managed money accounts slightly reduced their net-long exposure for the first time in four weeks, indicating some profit-taking. This cautious positioning confirms that while geopolitical risk is high, the market is not yet willing to price out the supportive effect of a neutral Fed.
Technically, we should wait for confirmation before acting. We will watch the $4,759 level closely, as a sustained break below it could open the door for a deeper correction towards $4,606. We remember the whipsaw price action in oil markets during the initial Iran deal talks back in 2015, and we expect similar volatility for gold now.
