(Kitco News) - The gold market is seeing some solid follow-through buying at the start of the week, as prices have rallied more than 3% early in the North American trading session.
The precious metal is seeing its best percentage gains since early February. Spot gold last traded at $4,351 an ounce, up more than 3% on the day.
Analysts note that gold is reacting to news that the U.S. and Iran will sign a peace deal on Friday, ending the latest months-long conflict in the Middle East. The news has pushed oil prices below $80 a barrel, which in turn is easing inflation pressures.
Although gold has bounced significantly from last week’s lows near $4,000 an ounce, some analysts warn that the precious metal isn’t out of the woods just yet. Despite Monday’s recovery, the market still remains below its 200-day moving average.
In a recent interview with Kitco News, Michele Schneider, Chief Market Strategist at MarketGauge, said that gold’s ability to hold support above $4,000 warrants investors testing the market with small positions; however, she added that she would like to see prices push back above their 200-day moving average, which currently comes in around $4,450 an ounce.
David Morrison, Senior Market Analyst at Trade Nation, noted that although gold has passed its first hurdle by holding support at a key psychological level, a lot can still happen between now and Friday, when the U.S. government and Iran are expected to sign the peace deal.
“The danger this week is that something happens to delay the signing of the treaty on Friday. If that were to happen, then $4,000 could get tested once again,” he said.
Other analysts also note that despite growing optimism, inflation remains a short-term headwind for gold. Nick Cawley, Contributing Analyst at Solomon Global, said in a note to Kitco News that markets will be eager to hear from the new Chair of the Federal Reserve, Kevin Warsh, as markets continue to price in rate hikes by year-end.
“Should Warsh signal a willingness to look past current inflation levels, perhaps framing the peace deal as a disinflationary tailwind, rate-sensitive markets could receive a meaningful secondary boost,” he said.
Cawley also noted that despite gold’s rally, it still faces some significant technical resistance levels.
“The spot price needs to push decisively above the 50-day simple moving average, currently sitting at $4,581/oz. Beyond that, the May 12 lower high at $4,773/oz. represents the next significant resistance level. A clean break above both would open the door to a more sustained move higher. With the political background improving, attention now shifts squarely to the Federal Reserve,” he said.
In a note published Monday, commodity analysts at TD Securities said that while they are optimistic on gold and silver, investors still need to pay attention to the oil market, as elevated prices continue to drive inflation fears.
“With rates still pricing in a hike by early 2027 and energy markets set to remain tight, the recovery across precious metals could be somewhat temporary,” the analysts said.
Commodity analysts at Société Générale warned investors that the drawdown of global oil inventories that governments used to limit the impact of the supply disruption will continue to affect oil prices and inflation even after the conflict officially ends.
“Even after supply returns, the system remains tight for an extended period, leaving prices highly sensitive to any incremental disruption. This is reflected in the forward curve, which shifts into deeper backwardation as prompt scarcity intensifies,” the analysts said. “The central implication is that inventories have become the critical shock absorber and now the primary source of risk. With stocks low and rebuilding gradual, even a modest additional disruption could trigger outsized price moves, keeping volatility and risk premia structurally embedded in oil markets.”
In the current environment, the French bank said it remains neutral on gold in the near term.
“The dominant force remains elevated real yields, which continue to cap upside despite persistent inflation, limiting gold’s appeal as both an inflation hedge and a defensive asset,” the analysts said.
