Gold's Dual Tailwinds: A Surprising Rally on Peace and Policy

Gold prices climbed for a fourth consecutive week, closing near $4,810 per ounce with a weekly gain of roughly one percent. This advance came despite a significant de-escalation in the Middle East, a scenario that typically pressures the haven asset. The rally was instead fueled by a dual tailwind of a weakening US dollar and falling bond yields.

The immediate catalyst was Iran's announcement on Friday that the Strait of Hormuz would remain open for commercial shipping during a ten-day ceasefire. This triggered a chain reaction, sending oil prices tumbling by more than ten percent, with some contracts down as much as 14 percent. While such geopolitical calming would usually weigh on gold, the market's focus shifted swiftly to the macroeconomic implications. The drop in energy prices eased near-term inflation concerns, a shift underscored by the US Producer Price Index rising just 4.0 percent year-over-year in March, well below the expected 4.6 percent.

This data reinforced market expectations for a less aggressive Federal Reserve, pushing the dollar index to a seven-week low of 98.01. A softer greenback makes dollar-priced gold cheaper for international buyers. Simultaneously, the yield on the benchmark ten-year US Treasury note fell to around 4.22 percent. Since gold offers no yield, lower interest rates enhance its relative appeal.

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However, the situation remains fragile, underpinning gold's structural support. US President Trump welcomed the Strait's opening but reaffirmed that the naval blockade of Iranian ports remains in "full force" pending a final peace agreement. The International Energy Agency's director, Fatih Birol, warned on Thursday that Europe has only about six weeks of jet fuel stocks left. The persistent risk of renewed energy price spikes and potential stagflation continues to favor defensive assets like gold.

Investor behavior reflects this cautious, contradictory backdrop. While the SPDR Gold Shares ETF (GLD) has seen outflows of approximately $360 million this month, global physical gold holdings still increased by about 4.5 tons. This divergence highlights uneven positioning among institutional investors. Furthermore, warnings of rising distressed loans in the private credit sector by 2026 point to underlying market stress that could boost gold's appeal as a hedge.

From a technical perspective, the next key resistance level sits at $4,900. Initial support is found around $4,750, with the 100-day moving average near $4,774 providing a firmer floor below. The metal has gained around three percent since early April, though it remains well below its all-time high of $5,595 set on January 29.

Looking ahead, traders will scrutinize upcoming US retail sales data and S&P Global Purchasing Managers' Index figures for fresh clues on economic strength and the Fed's policy path. For now, the CME FedWatch Tool suggests roughly a 52 percent chance that interest rates will remain unchanged through the end of 2026. Gold's paradoxical strength demonstrates that in the current climate, peace can be as potent a driver as peril, provided it unlocks disinflationary forces and keeps monetary policy accommodative.

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