Rising hopes for peace between the US and Iran put pressure on the dollar, causing gold prices to break through $4,650.
2026-05-06 14:54:38
Spot gold gained strong momentum for the second consecutive trading day on Wednesday (May 6), climbing to a new weekly high during the Asian session, briefly breaking through the $4,650 level, reaching a high of $4,668.30 per ounce as of 14:45. The dollar weakened across the board due to market optimism regarding a potential US-Iran peace agreement, helping the commodity recover further from a more than one-month low of around $4,500 reached on Monday. Furthermore, the decline in oil prices eased inflation concerns and curbed bets on more aggressive rate hikes by the Federal Reserve, which was seen as another positive factor for the non-interest-bearing yellow metal.
US President Donald Trump said on Tuesday that "Project Freedom"—the US military's operation to guide merchant ships out of the Strait of Hormuz—will be suspended for a period to observe whether an agreement can be reached with Iran. Trump added in a post on Truth Social that significant progress has been made on a comprehensive and final agreement with Iranian representatives. Previously, Defense Secretary Hergesse had stated that the US was not seeking to escalate tensions with Iran and that the US-Iran ceasefire was currently in effect. In addition, Secretary of State Rubio announced that "Operation Rage," a joint US-Israel operation against Iran launched on February 28, had ended.
This has boosted hopes for a peace agreement that would end the US-Israel war in Iran and reopen the economically vital Strait of Hormuz, thereby bolstering investor confidence and weakening the dollar's reserve currency status. Meanwhile, the latest developments dragged oil prices to a one-week low, easing concerns about soaring consumer inflation and paving the way for the Federal Reserve to maintain a cautious stance.
The CME Group's FedWatch tool shows that traders are currently pricing in a greater than 35% probability of a Federal Reserve rate hike before the end of this year. This could dampen traders' aggressive bearish bets on the dollar and limit further upside potential for gold prices in the short term.
Therefore, before confirming that spot gold has bottomed out near the $4,500 level and is poised for further gains, it's prudent to wait for strong follow-through buying. Traders are currently focused on the US ADP private sector employment report, due later in the North American morning session. Additionally, speeches by influential FOMC members and geopolitical developments will also drive demand for the US dollar. However, market focus will remain firmly on Friday's highly anticipated US non-farm payroll report, which will play a crucial role in determining the short-term direction of both the dollar and gold prices.
From the 4-hour chart, gold's robust rebound this week from the $4,500 level (near the 50% retracement of the March-April rally) and the subsequent break above the $4,600 psychological level are both favorable for the bulls. The precious metal is currently making its initial break above the 200-period simple moving average (currently at $4,651.69), and a sustained hold above this level would strengthen the bullish signal.
Meanwhile, momentum indicators support a bullish stance. The Relative Strength Index (RSI) hovers around 55, suggesting robust market conditions but not yet entering overbought territory. Furthermore, the Moving Average Convergence Divergence (MACD) histogram remains positive and is rising, suggesting that bullish pressure is re-accumulating as gold prices challenge upper supply levels.
On the downside, initial support lies at the 38.2% Fibonacci retracement level of $4588.07. Further retracement, with bears in control, could see buying demand near the 50% retracement level (approximately $4494.70) and the 61.8% retracement level (approximately $4401.33). A convincing break below the latter would negate the bullish outlook and shift the short-term bias back in favor of bears in gold prices.
(Spot gold 4-hour chart, source: FX678)
At 14:35 Beijing time, spot gold was trading at $4664.13 per ounce.
US President Donald Trump said on Tuesday that "Project Freedom"—the US military's operation to guide merchant ships out of the Strait of Hormuz—will be suspended for a period to observe whether an agreement can be reached with Iran. Trump added in a post on Truth Social that significant progress has been made on a comprehensive and final agreement with Iranian representatives. Previously, Defense Secretary Hergesse had stated that the US was not seeking to escalate tensions with Iran and that the US-Iran ceasefire was currently in effect. In addition, Secretary of State Rubio announced that "Operation Rage," a joint US-Israel operation against Iran launched on February 28, had ended.
This has boosted hopes for a peace agreement that would end the US-Israel war in Iran and reopen the economically vital Strait of Hormuz, thereby bolstering investor confidence and weakening the dollar's reserve currency status. Meanwhile, the latest developments dragged oil prices to a one-week low, easing concerns about soaring consumer inflation and paving the way for the Federal Reserve to maintain a cautious stance.
The CME Group's FedWatch tool shows that traders are currently pricing in a greater than 35% probability of a Federal Reserve rate hike before the end of this year. This could dampen traders' aggressive bearish bets on the dollar and limit further upside potential for gold prices in the short term.
Therefore, before confirming that spot gold has bottomed out near the $4,500 level and is poised for further gains, it's prudent to wait for strong follow-through buying. Traders are currently focused on the US ADP private sector employment report, due later in the North American morning session. Additionally, speeches by influential FOMC members and geopolitical developments will also drive demand for the US dollar. However, market focus will remain firmly on Friday's highly anticipated US non-farm payroll report, which will play a crucial role in determining the short-term direction of both the dollar and gold prices.
Technical Analysis: Gold is poised to maintain its momentum; a break above the 200-day moving average is key.
From the 4-hour chart, gold's robust rebound this week from the $4,500 level (near the 50% retracement of the March-April rally) and the subsequent break above the $4,600 psychological level are both favorable for the bulls. The precious metal is currently making its initial break above the 200-period simple moving average (currently at $4,651.69), and a sustained hold above this level would strengthen the bullish signal.
Meanwhile, momentum indicators support a bullish stance. The Relative Strength Index (RSI) hovers around 55, suggesting robust market conditions but not yet entering overbought territory. Furthermore, the Moving Average Convergence Divergence (MACD) histogram remains positive and is rising, suggesting that bullish pressure is re-accumulating as gold prices challenge upper supply levels.
On the downside, initial support lies at the 38.2% Fibonacci retracement level of $4588.07. Further retracement, with bears in control, could see buying demand near the 50% retracement level (approximately $4494.70) and the 61.8% retracement level (approximately $4401.33). A convincing break below the latter would negate the bullish outlook and shift the short-term bias back in favor of bears in gold prices.
(Spot gold 4-hour chart, source: FX678)
At 14:35 Beijing time, spot gold was trading at $4664.13 per ounce.
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