On Monday, May 11th, spot gold prices reversed to close higher, with investors closely monitoring diplomatic developments between the US and Iran while awaiting key US inflation data scheduled for release later in the week.

At Monday's close, spot gold was priced at $4734.73 per ounce, marking a 0.41% gain for the day, after having plunged more than 1% earlier in the session.

What happened to the gold price? During the Asian trading session on Monday, spot gold dropped sharply to a daily low of $4647.88 per ounce, driven by rising oil prices following weekend news indicating renewed tensions in US-Iran relations.

However, gold prices staged a sustained rebound during European and US trading hours, approaching the $4750 per ounce level.

Market analyst Jim Wyckoff noted, "We are seeing some bargain-hunting in the market, while investors are also adjusting their positions ahead of the key US inflation data this week."

Recent comments from US President Donald Trump, stating that the ceasefire with Iran is "on life support," spurred a surge in oil prices.

Analysts at ING stated in a report, "This setback introduces significant uncertainty into the ceasefire timeline. With inflation risks remaining elevated, it reinforces expectations for 'higher-for-longer' interest rates—an outlook that has consistently pressured gold throughout the conflict."

ING forecasts gold could reach $5000 per ounce by year-end, though stalled peace talks have increased short-term uncertainty.

Additionally, Indian Prime Minister Narendra Modi called on citizens to refrain from purchasing gold for the next year to protect foreign exchange reserves. This led to a sharp decline in shares of Indian jewelry retailers. India is the world's second-largest consumer of gold.

Markets will focus on the US Consumer Price Index (CPI) scheduled for release on Tuesday, followed by the Producer Price Index (PPI) on Wednesday.

Trump Says Ceasefire with Iran 'On Life Support' In response to a Washington proposal aimed at restarting negotiations, Iran on Sunday emphasized the need to end hostilities on all fronts, including in Lebanon.

Iran also demanded US compensation for war damages, the return of control over the Strait of Hormuz, the unfreezing of funds, and an end to the US naval blockade. Tehran's response did not mention handing over its nuclear arsenal to the US—a key demand from Trump, who has stated Iran cannot possess nuclear weapons.

According to Axios, US officials revealed that Trump is meeting with the National Security Council to assess whether to resume military operations.

President Trump stated on Monday that the already fragile US-Iran ceasefire is on "life support" after Iran submitted an "unacceptable" counter-proposal to Washington.

Speaking to reporters in the Oval Office, Trump described the roughly month-old ceasefire arrangement as currently "incredibly fragile."

"After reading the garbage they sent—I didn't even finish it—I would say it's in the most fragile state right now," Trump said.

He further analogized, "I would say this ceasefire is on serious life support, like when a doctor walks in and says, 'Sir, your loved one has about a 1% chance of survival.'"

In an interview with Fox News, Trump also mentioned he is considering restarting "Project Freedom." He added that if the plan is reinstated, its scope might extend beyond escorting ships through the Strait of Hormuz.

However, Trump emphasized that no final decision has been made yet.

Market concerns over escalating tensions pushed US crude oil prices up by 3.60%, with West Texas Intermediate (WTI) reaching $98.09 per barrel. The US dollar also strengthened, with the Dollar Index (DXY)—which tracks the currency against a basket of six major peers—rising 0.10% to 97.94.

Florence Schmit, an energy strategist at Rabobank, commented, "In just a few days, the situation has shifted from de-escalation back to escalation, and the oil market has reacted—albeit modestly."

Gold Technical Analysis FXStreet analyst Christian Borjon Valencia pointed out that from a technical perspective, gold prices may consolidate further, trapped between key technical resistance and support levels, with the Relative Strength Index (RSI) indicating momentum remains flat. Although the RSI shows a bullish bias, it is currently in a sideways pattern.

Valencia stated that on the upside, gold must break above the 50-day Simple Moving Average (SMA) at $4769 per ounce. A successful breach would target the 100-day SMA at $4772 per ounce, with the ultimate aim being the $4800 psychological level.

Valencia added that on the downside, the first support level for gold is the psychological $4700 per ounce mark. A break below that would expose the 20-day SMA at $4694 per ounce, potentially leading to a challenge of the May 4th low near $4500 per ounce.