Gold prices gapped lower overnight but have since pushed higher to almost get back to the closing level of Friday’s session. The situation in the Middle East has clearly intensified again in the last couple of days, shifting our gold forecast tilted slightly to the downside amid increased risks of another sharp spike in oil prices, which could result in a higher dollar and bond yields. So far, though, oil prices were up a more modest 5% to around $95 per barrel (Brent). The US seizure of an Iranian-flagged vessel near the Strait of Hormuz triggered sharp warnings from Tehran, including threats of retaliation and renewed uncertainty around any continued discussions in Pakistan. With the two-week ceasefire set to expire on Wednesday, progress appears limited. For now, Iran has reversed its brief reopening of the strait, after accusing the US of failing to uphold its commitments and continuing a blockade on Iranian ports.
Can gold still push higher?
Despite the escalating rhetoric, there are still indications that negotiations may not be entirely off the table. Trump has adopted a cautious optimism about reaching a deal, even as he warns of possible strikes on Iranian civilian infrastructure if talks collapse.
Iran’s position remains largely unchanged: lifting the Hormuz blockade is a prerequisite for any meaningful negotiations. Publicly, officials continue to emphasize that major disagreements — particularly over nuclear issues — remain unresolved. Nevertheless, markets appear relatively unfazed.
Behind the scenes, quieter diplomatic efforts are ongoing. Pakistan’s Army Chief, General Munir, has reportedly engaged with Trump, underscoring that the blockade of Hormuz remains a central barrier to progress. According to Reuters, Trump indicated he would take this perspective into account.
If the two sides meet again and we see a deal this time, this would be clearly positive for risk assets, which could lift gold prices back up to $5,000. Otherwise, the lath forward could remain bumpy.
Technical gold forecast and key levels to watch
Following a three-week recovery, gold prices have now entered a resistance zone between $4,800 and $4,850. This area is significant, as it represents a convergence of multiple technical factors, including previous support and resistance levels. We also have the underside of a broken bullish trendline aligning with the 61.8% Fibonacci retracement level.
Since early April, XAUUSD has attempted to break through this zone on several occasions, but so far there has been no decisive move to the upside. However, the lack of strong selling pressure around this level could be interpreted as a bullish signal. The more a resistance level is tested without a corresponding sell-off, the greater the likelihood of an eventual breakout—in this case, to the upside. That said, confirmation is still required. A daily close above the $4,850 level would confirm a bullish reversal and could pave the way for further gains in the days and weeks ahead.
If this condition is met, the next key target would be the $5,000 level, which aligns with the 78.6% Fibonacci retracement and also represents a psychologically important level.
On the downside, initial support is seen around $4,750. Below that, the next key level is $4,600, followed by $4,500. The critical “line in the sand” sits at $4,400. This level previously acted as support in early February. Although price briefly broke below it toward the end of March, it quickly reclaimed the level and staged a solid recovery.
As long as $4,400 holds, the longer-term bullish trend remains intact, even if we see continued struggles in the near-term.
For now, it’s a case of wait and see for the gold forecast. Much will depend on the direction of bond yields and the US dollar, which are, in turn, influenced by inflation outlook and the oil prices, making the Middle East situation the key driver.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
