While gold's short-term outlook remains uncertain due to geopolitical developments, bullish sentiment is likely to prevail in XAU/USD over the medium term. Let's discuss this topic and outline a trading plan.
The article covers the following subjects:
Major Takeaways
- Gold has found support.
- Geopolitical tensions remain elevated.
- The Fed is expected to resume rate cuts.
- Buying XAU/USD with targets of around 5,000 remains relevant.
Weekly Fundamental Forecast for Gold
Gold managed to rebound from two-month lows amid rumors of a potential agreement between the US and Iran, as well as mixed US economic data. The US economy grew by 1.6% in the first quarter, below the expected 2%. Meanwhile, inflation, as measured by the Personal Consumption Expenditures (PCE) index, accelerated to 3.8% in April. This combination of indicators points to a higher risk of stagflation, which is generally favorable for XAU/USD.
It appears that the worst may be over for the precious metal. The conflict in the Middle East and higher oil prices raised concerns about inflation and further monetary tightening by major central banks. Before the bombing of Iran, the dominant narrative was quite different: investors expected the Fed to continue its monetary easing cycle. The change in sentiment caused XAU/USD to decline by 14% from its late-February highs.
Oil and Gold trends
Source: Trading Economics
A US-Iran agreement could create more favorable conditions for gold. Concerns about higher interest rates and rising bond yields would likely ease as investors gain confidence that the inflation spike is temporary.
However, this tailwind remains weak for now. Consumer prices are unlikely to decline immediately, as that process takes time. As a result, central banks led by the Fed are likely to keep interest rates elevated. Moreover, Brent crude is expected to return to pre-war levels only by the end of 2026.
The terms of any US-Iran agreement have not yet been disclosed. Most likely, it would begin as a preliminary framework designed to facilitate future negotiations on nuclear issues and sanctions. There is no guarantee that such terms would not be violated. As a result, market uncertainty is likely to persist, supporting demand for the US dollar as a safe-haven asset. At the same time, a stronger dollar and higher Treasury yields continue to weigh on gold.
It is therefore unsurprising that UBS has lowered its year-end 2026 gold forecast from $5,900 to $5,500 per ounce. According to the bank, investors are once again comparing XAU/USD with alternative assets such as the US dollar and Treasury securities.
The medium-term outlook for the precious metal remains bullish. If the recent inflation surge proves temporary, the Fed may eventually return to easing monetary policy.
Weekly Trading Plan for XAU/USD
In this environment, investors may begin cautiously accumulating gold positions as geopolitical risks gradually fade into the background. Uncertainty may increase volatility, but any decline in XAU/USD could provide an opportunity to open long positions targeting 4,675, 4,835, and 5,000.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAUUSD in real time mode
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