After two consecutive weeks of decline, the gold market has somewhat regained its upward momentum when it returned above the 4,700 USD/ounce mark.
Although gold prices have not yet escaped the prolonged sideways trend, many experts believe that the increase in the last session of the week is a noteworthy development in the current context.
Gold prices recovered past the short-term resistance zone after both the US and Iran signaled some progress in negotiations towards a long-term peace agreement. However, the ceasefire continues to face many challenges as the two sides show more military moves before the end of the week.
As of the most recent session, spot gold prices traded around 4.715.61 USD/ounce, up more than 2% in the week.
New developments in the Middle East currently do not have a major impact on oil prices as WTI oil still remains below the 100 USD/barrel mark. Relatively stable energy prices also help reduce inflation concerns, creating conditions for the gold market to recover.
Mr. Neil Welsh – Director of Metals at Britannia Global Markets believes that investor sentiment towards the Iranian conflict is changing somewhat.
In my opinion, what is noteworthy is that the new developments in the Middle East currently have a more limited impact on market risk sentiment. This shows that investors are viewing these events as local rather than creating a broader systemic risk," he said.
Mr. Ole Hansen - Head of Commodity Strategy at Saxo Bank also noted that the market is gradually adapting to information related to conflicts in the Middle East.
The market seems to be shifting its attention to expectations that both sides want to reduce tensions. However, the process to reach a final agreement still has many issues to resolve," he said.
Besides geopolitical factors, the gold market is also monitoring the resilience of the US economy. Data released on Friday showed that the US economy created 115,000 jobs in April, higher than market forecasts.
Meanwhile, wage pressure was lower than expected and the unemployment rate remained unchanged at 4.3%.
Experts believe that relatively positive labor data helps the Fed have more room to focus on inflation risks, thereby maintaining interest rates at the current level in the near future.
According to CME's FedWatch tool, the market currently assesses the possibility of the Fed raising interest rates at the end of the year at around 14%, up from 9% last week.
However, many experts believe that the gold market is currently not too worried about the possibility of the Fed raising interest rates because the global economy still has many uncertain factors.
Investors are currently waiting for data on the US consumer price index (CPI) and producer price index (PPI) to be released next week to better assess the inflation trend.
In addition, the market is also monitoring the possibility of the US Senate voting to nominate Mr. Kevin Warsh as the next Fed Chairman. Mr. Warsh once expressed his support for interest rate cuts to support economic growth, and proposed narrowing the Fed's balance sheet.
Technically, many experts believe that gold prices are still in a period of accumulation.
Mr. Nick Cawley - Analyst at Solomon Global said that if peace talks continue to be maintained, oil prices and global inflation expectations may continue to cool down, thereby supporting gold and silver prices.
According to him, if gold surpasses and closes above the peak of April 17 at 4,890 USD/ounce, the market may head towards the 5,000 USD/ounce mark in the short term.
Meanwhile, Mr. Ole Hansen believes that the market needs more clear signals to confirm a stronger upward trend, but gold price adjustments are still attracting buying power back from investors.
