In Asian trading on Friday, gold was trading around $4520 per ounce, up approximately 0.5% from the previous close. Progress in a US-Iran ceasefire agreement initially weakened safe-haven demand for the US dollar, providing support for gold prices.

However, US PCE inflation data for April reached a three-year high, with the headline figure at 3.8% and the core at 3.3%. This reinforced market expectations for a Federal Reserve interest rate hike within the year. Market pricing currently suggests about a 50% probability of a 25-basis-point hike by the end of 2026, which has capped the upside for gold.

Ceasefire Progress: Supportive but Uncertain According to media reports citing US officials, US and Iranian negotiators have reached an agreement on a memorandum of understanding, though it still requires final approval. The terms were largely agreed upon, but both sides need approval from their top leadership. The Iranian side has stated it has received the necessary approvals and is ready to sign. US negotiators have briefed the US President on the details. The President has indicated he needs a few days to consider the matter.

This development has eased concerns about a prolonged disruption to regional oil flows, pressuring crude oil prices near monthly lows and, in turn, dampening rate hike expectations. Furthermore, the renewed optimism for peace has somewhat undermined the US dollar's reserve currency appeal, offering support to gold. However, the proposal still requires final approval. Significant disagreements remain on issues such as Iran's nuclear program and control of the Strait of Hormuz, leading investors to be skeptical about a swift end to the three-month-long conflict.

Risk of Renewed Conflict Caps Gold's Gains The potential for a resumption of open hostilities should temper market optimism. The ceasefire still requires approval, and with fundamental disagreements on key issues, any miscalculation could reignite conflict. This uncertainty should help limit further downside for the US dollar while also capping gold's upside. For gold, safe-haven demand and rate hike expectations are counteracting each other, leaving prices in a dilemma.

Thus, while the ceasefire news is positive for gold, persistent geopolitical risks make a sustained unilateral rally difficult. Until the US-Iran situation clarifies, gold is more likely to trade within a range rather than trend decisively higher.

US PCE Inflation Hits 3-Year High, Boosts Hike Expectations Dollar bears also appear hesitant due to US inflation data. The year-on-year PCE price index accelerated to 3.8% in April, up from 3.5% previously, driven largely by higher energy costs stemming from Middle East conflicts. The core PCE, excluding food and energy, rose 3.3% year-on-year, meeting expectations.

These figures have strengthened the view that the Federal Reserve may need to maintain higher interest rates for longer. Although revised first-quarter US GDP showed an annualized growth rate of 1.6%, below the initial estimate of 2.0%, traders seem convinced that persistent inflation will compel the Fed to hike rates by year-end.

Market Pricing: ~50% Chance of a Hike by Year-End According to the CME FedWatch Tool, traders are currently pricing in roughly a 50% probability of a 25-basis-point Fed hike by the end of 2026. This expectation is a key factor pressuring non-yielding gold. Therefore, caution is warranted before betting on a significant dollar decline or further gold appreciation.

Technical Perspective From a technical standpoint, the medium-term outlook appears weak. After a previous rally and subsequent pullback, the price is currently consolidating at lower levels following the decline.

The price is trading below several key moving averages, including the 20-day, 50-day, and 100-day MAs, which are arranged in a bearish pattern, creating layered resistance. Immediate resistance is concentrated around $4510, with further resistance at the 20-day MA near $4584 and the 50-day MA near $4627.

However, the price is holding above the long-term 200-day MA. This level, combined with the recent low near $4366, forms a dual support zone. The strong support from the prior low around $4099 suggests the long-term uptrend is not broken, limiting the potential for a sharp decline.

The RSI indicator is in neutral territory, showing neither overbought nor oversold conditions, indicating balanced buying and selling pressure and unclear short-term directional signals. The MACD indicator remains in negative territory with the DIFF line below the DEA line, confirming the bearish structure. However, the shrinking negative histogram suggests weakening downward momentum and the potential for a technical rebound.

Overall, the market lacks a clear short-term trend and is likely to remain range-bound. Downside risks have eased, but signals for a complete reversal are not yet present.

Tactically, it is crucial to monitor key support and resistance levels. If the price holds above the long-term MA support near $4400, one could watch for rebound opportunities, focusing on the strength of any breakout above the $4510-$4584 resistance zone. A break below the core support levels would signal renewed weakness, potentially targeting the $4099 low. A cautious approach is advisable at this stage, using key price levels to gauge the subsequent direction.