Gold prices (XAU/USD) maintained their bullish momentum for a third straight day on Friday, trading close to levels last seen on April 22 during the early European session. Rising geopolitical tensions in the Middle East, combined with ongoing trade uncertainties, have dampened investor appetite for riskier assets. This dynamic continues to drive demand for traditional safe-haven assets like gold.
Adding to gold’s appeal are growing expectations that the Federal Reserve will cut borrowing costs further in 2025, pushing investors toward the non-yielding metal. However, a modest rebound in the US Dollar, recovering from its lowest point since March 2022, has limited gold’s upside. Still, market fundamentals favor the bulls, supporting the case for further price gains.
Middle East Escalation Fuels Safe-Haven Demand
In a dramatic development on Friday, Israel launched pre-emptive airstrikes targeting Iran’s nuclear facilities and military sites, significantly escalating the ongoing regional conflict. This move propelled gold prices to their highest levels since late April during the Asian trading session.
Israel’s Prime Minister Benjamin Netanyahu emphasized that the operation aims to neutralize Iran’s nuclear threat and will continue as long as necessary. In response, Israel declared a state of emergency, warning that Iranian retaliation remains a distinct possibility.
Iran’s armed forces accused Israel of conducting the attacks with US support, though US Senator Marco Rubio clarified that America was not involved and described the strikes as a self-defense measure communicated by Israel. Iran’s Supreme Leader, Ayatollah Ali Khamenei, vowed severe retaliation, warning Israel of a “bitter fate,” raising concerns of a broader, more destructive conflict in the region and increasing market volatility.
Trade and Economic Factors Add Complexity
On the trade front, US President Donald Trump expanded steel tariffs to include a range of household appliances, maintaining tariffs on Chinese imports at 55%. This ongoing trade friction adds to the risk-averse mood among investors.
Economic data from the US showed the Producer Price Index (PPI) rose slightly by 0.1% in May, after a decline in April, alongside a modest increase in consumer prices. These inflation trends support expectations of continued easing by the Federal Reserve.
Market participants now await the Preliminary release of the University of Michigan’s Consumer Sentiment Index and Inflation Expectations for additional short-term direction. Despite this, geopolitical developments and US trade policies remain the primary focus.
Technical Outlook: Gold Eyes All-Time Highs
Technically, gold’s recent gains have followed a clearly defined upward channel, signaling a robust short-term uptrend. Daily chart indicators remain bullish, reinforcing a positive near-term outlook.
If gold decisively breaks above the immediate resistance near $3,445, it could test its all-time peak around the $3,500 mark reached in April—a key psychological and technical level coinciding with the upper boundary of the ascending channel. A sustained move above this would likely trigger further buying momentum.
Conversely, any pullbacks may offer buying opportunities near $3,400. However, a drop below $3,385 could open the door for deeper corrections towards intermediate support at $3,355, and further down near $3,330—the lower boundary of the channel. Breaching this level would undermine the bullish setup and shift sentiment toward a bearish bias.
In summary, gold’s outlook remains bullish amid escalating Middle East tensions and expectations of Fed easing, though US Dollar strength and technical resistance levels pose challenges to further gains. Investors will closely monitor geopolitical developments and economic data for cues on the metal’s next move.
