Gold (XAU/USD) experienced a week of relative stability following its recent record-setting rally, with investors closely monitoring developments in the Iran-Israel conflict and upcoming macroeconomic releases from the US.
The week began with gold benefiting from safe-haven flows and bullish momentum amid news of escalating tensions between Iran and Israel. A retaliatory assault by Iran, following a suspected Israeli attack on Iran’s consulate in Damascus, spurred a more than 1.5% gain in gold on Monday, marking its highest daily close on record. Despite upbeat US Retail Sales data for March, gold remained resilient, shrugging off renewed strength in the US Dollar.
However, as Western nations urged restraint and hinted at potential sanctions against Iran, market sentiment improved on Tuesday, hampering gold’s upward momentum. Additionally, hawkish comments from Federal Reserve (Fed) officials pushed US Treasury bond yields higher, limiting gold’s gains.
Fed Chairman Jerome Powell emphasized the lack of significant progress on inflation and suggested maintaining current rates if higher inflation persists, echoing sentiments from San Francisco Fed President Mary Daly. This tempered market expectations for immediate policy action, dampening gold’s appeal.
Mid-week saw a downward correction for gold as market activity slowed, with little high-tier data to guide investors. Despite a subdued market on Thursday, gold struggled to find direction amidst conflicting reports regarding the Iran-Israel conflict.
Friday’s early Asian session witnessed a flight to safety following reports of Israeli missiles striking Iran, pushing gold above $2,400. However, as tensions eased with no immediate retaliation confirmed, gold retraced its gains.
Looking ahead, gold investors await key US data releases next week, including the Advanced Gross Domestic Product (GDP) data and the Personal Consumption Expenditures (PCE) Price Index. A stronger-than-expected GDP could bolster the US Dollar and weigh on gold prices, especially if geopolitical tensions subside. Conversely, continued uncertainty in the Middle East could sustain safe-haven demand for gold.
Fed Chairman Powell’s remarks on inflation stability further influence market sentiment, with investors closely monitoring any shifts in the Fed’s policy stance. Amidst these factors, gold’s trajectory remains contingent on the interplay between geopolitical developments and economic data releases, shaping its near-term outlook.
