Gold (XAU/USD) increased by approximately 0.75% on Friday, trading at $4,711 after rebounding from daily lows of $4,673, as optimism about a potential resolution to the Middle East conflict buoyed market sentiment. This optimism is seen as a factor that could drive oil prices lower and ease inflationary pressures, contributing to the rise in gold prices [1]. Despite ongoing tensions, including Iran's delayed response to the US 14-point memorandum and continued hostilities in the Persian Gulf, the market remains hopeful for peace. The United Arab Emirates was also reported to be under attack during this period [1].
Oil prices, specifically West Texas Intermediate (WTI), have been volatile but are set to end the week down more than 6%. The US Dollar Index (DXY), which has shown a positive correlation with WTI, fell 0.33% to 97.93. Additionally, a decline in US Treasury yields, with the 10-year note down two basis points at 4.362%, has further supported gold's upward movement [1].
US economic data showed Nonfarm Payrolls for April rising by 115K, surpassing the 62K estimate, and March's figure was revised up to 185K. The unemployment rate remained at 4.3%, below the Federal Reserve's 4.5% projection, while average hourly earnings grew by 3.6%, missing the 3.8% forecast. Despite these strong jobs numbers, traders appeared to focus more on inflation and geopolitical developments [1].
Consumer sentiment in the US, as measured by the University of Michigan, fell to a record low of 48.2 in May, down from 49.8 in April, with Americans citing high fuel prices as a concern. One-year inflation expectations dropped to 4.5%, and five-year expectations to 3.4%. Money markets are not anticipating rate cuts in 2026, according to Prime Terminal data. Federal Reserve officials expressed mixed views: Chicago Fed President Austan Goolsbee maintained a hawkish stance, while Governor Stephen Miran suggested rate cuts may be appropriate [1].
Looking ahead, markets are focused on the upcoming release of US April inflation data, including the Consumer Price Index (CPI) and Producer Price Index (PPI), as well as retail sales and further comments from Federal Reserve officials. Technically, gold is testing resistance in the $4,700-$4,715 range, with a decisive break potentially opening the way to further gains, and buyers are eyeing the $5,000 level [1].
CONCLUSION
Gold's rise reflects a combination of geopolitical optimism, falling oil prices, and lower US Treasury yields, despite strong US jobs data. Market participants are closely watching upcoming US inflation data and Federal Reserve commentary for further direction. The technical outlook suggests that a break above current resistance could lead to additional gains for gold.