Gold’s Week of Whiplash: Ceasefire Hopes, Sticky Inflation, and Record Stock Markets Collide

Gold capped a turbulent week with a sharp Friday rebound, clawing back from a two-month low as diplomatic signals from the Middle East collided with fresh inflation data that tempered any euphoria. The precious metal traded between $4,569.90 and $4,596.60 on the session, notching gains of roughly 1.5% — a reversal that erased earlier losses and left the week's finish in positive territory.

The catalyst was a flurry of reports out of Washington and Tehran suggesting progress toward a 60-day extension of the ceasefire between the US and Iran, with talks centered on reopening the strategic Strait of Hormuz and steps to curb Iran’s nuclear program. A person familiar with the matter told Reuters on Thursday a memorandum of understanding was under discussion, though Iranian spokesman Baghaei cautioned that no final deal had been reached. Still, the mere prospect of détente weighed on the dollar and pushed Brent crude lower — a combination that traditionally lifts gold as a cheaper alternative for non-dollar buyers and eases inflation fears tied to energy costs. The metal staged a bullish reversal after briefly dipping below $4,400, with the key support zone at $4,381 holding firm.

Inflation data spoil the party

Any sustained rally, however, faces a formidable ceiling in the form of persistent US price pressures. The headline PCE price index — the Fed’s preferred inflation gauge — accelerated to 3.8% year-on-year in April, its fastest pace in three years, while the core PCE rate edged up to 3.3%. Separate data on the Chicago PMI for May surprised sharply to the upside at 62.7 points, versus analyst expectations of 50.5. The market is now pricing a 42% to 50% probability of another rate hike by year-end, a scenario that raises the opportunity cost of holding non-yielding gold. The metal’s weekly gain was contained at 1.08%, and despite Friday’s lift, it remains 16.15% below its January high of $5,450.

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Diverging physical demand from Asia

On the physical front, signals were mixed. Chinese net gold imports via Hong Kong surged 81.2% month-on-month in April, underscoring the region’s continued appetite despite cautious near-term sentiment. In India, however, the government’s decision to raise import duties to 15% triggered an unusual situation where local gold traded below the international price, curbing demand. Analysts noted that high absolute prices and the tariff effect kept Indian buyers on the sidelines.

Institutions remain bullish — but watch the supports

Major houses are looking past the near-term headwinds. JPMorgan maintains a year-end target of $6,000, while Goldman Sachs sees gold at $5,400 by the end of 2026. COMEX net-long positions rose by nearly 5,000 contracts last week to around 100,000 contracts, signaling speculative conviction. From a technical perspective, the bounce off $4,381 reinforces the zone as a solid floor; a break below that level could open a slide toward $4,094. On the upside, the next target sits at $4,660, with the metal’s weekly volatility — hovering near 20% — underscoring how sensitive the market remains to every twist in the geopolitical and macro narrative.

Looking ahead, the viability of the Iran truce talks will be the primary swing factor in the near term, but as long as the inflation debate dominates the Fed’s path, gold remains tethered to incoming data and energy price developments. Friday’s rebound, while welcome, was far from a decisive breakout.

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