Gold Climbs Above $4,750 as Iran Peace Hopes Reshape the Trade

XAUUSD went up 0.5% to $4,715.14, and they stayed above $4,750 for a third day in a row. They went up more than $250 from Monday's lows because Iran was said to be reviewing a U.S.-backed peace plan, which changed the way commodities were priced, and a weaker dollar gave them technical support.

Comex gold futures broke through the immediate resistance level of $4,700. According to RHB Retail Research expert Joseph Chai, $4,850 is the next important level, and $5,000 is a zone of strong selling pressure.

The top number isn't what it seems to be, though. While gold has been up for three sessions, it is still down more than 10% since the U.S.In late February, Israel started a war with Iran. This was one of the strangest actions I can remember from an asset that is meant to do well in times of geopolitical crisis.

Why Gold Hasn't Behaved Like a Safe-Haven During This War

The reason lies at the point where inflation, interest rates, and the unique nature of this war all come together. As soon as the war started, there was a huge change in the price of oil. Brent crude went from around $50 a barrel to over $100 a barrel, which caused people to worry about inflation. 

In response, central banks in the U.S. and Europe started to talk about raising interest rates instead of lowering them. The ECB and the Bank of England hinted at possible tightening. The Federal Reserve, on the other hand, kept rates the same and predicted fewer rate cuts than the market had thought.

For gold, which doesn't earn interest, this rate situation is clearly bearish. Investors are more interested in bonds and cash equivalents that earn real yield when they think interest rates will stay high or go up. The fear premium about geopolitics should have made gold go up, but the hope premium about rates pushed it down instead.

During the height of the war, gold fell about 10–20% from its pre-war values. This was one of the few times that war, energy disruption, and global uncertainty all happened at the same time.

What's Driving the Current Recovery

The three-session rise shows that this line of thinking is wrong. The extreme end of the conflict risk premium has gone down because Iran is said to be reviewing the U.S. peace plan. This has helped Brent crude fall about 6% this week on hopes of de-escalation. Inflation predictions for the near future go down when oil prices go down, and the need for more rate hikes goes down when inflation expectations go down.

Gold is going up right now because of that chain effect. The U.S. dollar fell 0.1%, which made gold cheaper for people around the world. More importantly, if the market starts to price in a more moderate inflation path as oil prices fall, the opportunity cost of keeping gold that doesn't earn any interest goes down. This supports prices through the rate expectations channel even before a rate cut actually happens.

Chai from RHB did a great job of describing the technical picture. If the price breaks above $4,700, the next support level of $4,850 will become clear. The problem is that both the 20-day and 50-day simple moving averages are going down. This means that even though short-term momentum is turning positive, fundamental downside pressure is still present. Gold was trading around $5,000 before the war, which is where a move above that level would probably face a lot of selling pressure.

The Range That Defines the Trade

Gold is expected to stay in a wide range of $4,600 to $5,100 as long as talks between the U.S. and Iran are ongoing but not yet concluded. The reasoning is clear: the result of the war is the main factor that affects both inflation expectations and the geopolitical risk premium, and there is no clear timeline for when that outcome will happen.

Within that range, the trade is not based on strong beliefs about geopolitics. Instead, it is based on three factors: the direction of the dollar, the path of bond yields, and the movement of the oil price. This means that gold is moving toward the top of the range when all three of these things happen. When they change, like when the war first got worse, gold goes toward the bottom of the range.

As of now, the $4,750–$4,850 range is supported by a weaker dollar, falling oil prices, and stable inflation forecasts. A real diplomatic breakthrough that keeps Brent below $85 and changes the Fed's views toward cuts in the second half of the year would be what sets off a test of $5,000 resistance. The drop toward $4,600 is confirmed by the end of talks, which sent crude back to $100 or more.

The three-session rise in gold prices is due to rates and the dollar, not fear. It was thought that this asset would do well during the biggest global crisis in years, but it has been caught between inflation shock and safe-haven demand, and inflation has been winning.

The de-escalation in Iran needs to last long enough to change the Fed's mind in order for the bull case to fully come true. Until then, the range is $4,600 to $5,100, the next test is $4,850, and the ceiling is $5,000, which needs a fundamentally better macro backdrop, not just a three-day bounce, to clear firmly.