Gold (XAU/USD) surged more than 1% on Monday, May 25, 2026, as investors bought into the dip following last week's pullback — buoyed by renewed optimism over a potential US-Iran peace deal that sent the U.S. dollar lower and eased oil-driven inflation fears. The move underscores gold's delicate position in the current macro landscape: simultaneously pressured by hawkish Fed expectations and supported by persistent geopolitical uncertainty.
XAU/USD Price Action: The Numbers
Spot gold was up 1.1% at $4,559.07 per ounce as of 0736 GMT. U.S. gold futures for June delivery gained 0.8% to $4,559.80. While U.S. President Donald Trump warned that he was in no hurry to finalise a deal with Iran, investors appeared to rely more on his Saturday statement that Washington and Tehran had "largely negotiated" a memorandum of understanding on a peace deal that would reopen the Strait of Hormuz.
Gold extended its recovery from last week's lows near $4,450, reaching session highs at $4,579 on Monday, as the U.S. Dollar Index retreated to the bottom of last week's trading range. US President Donald Trump and Secretary of State Marco Rubio reported some advances in the negotiations with Tehran, yet discarded an immediate breakthrough and warned that the US blockade of the Strait of Hormuz will remain in place until a deal is signed and sealed.
What's Driving the Dip-Buying: Dollar Weakness and Oil Easing
The three-way dynamic between gold, the U.S. dollar, and crude oil is the dominant market force shaping XAU/USD right now. "Trump has been raising market hopes for some sort of deal with Iran, which could lead to the reopening of the Strait of Hormuz." A resolution of the Hormuz closure would remove the key energy supply shock that has been embedding a geopolitical risk premium across asset classes — and for gold, that means two competing forces: a reduced inflation tail-risk (bearish for gold) offset by a weaker dollar and reduced safe-haven demand (initially bearish but ultimately constructive as institutional dip-buyers step in).
On Monday, a spokesperson from Iran's Foreign Ministry affirmed that both parties are negotiating the end of the war and assured that nuclear negotiations are proceeding — providing just enough diplomatic signal to keep the dip-buying thesis alive without triggering an all-out risk-on surge that would crush gold's safe-haven premium.
Technical Picture: Falling Wedge Breakout in Play
In the daily chart, XAU/USD trades at $4,578.87. The metal remains capped in the short term, with price lodged below the 21-day, 50-day, and 100-day simple moving averages, which together suggest that rallies are likely to face supply before the broader uptrend resumes. The 14-day Relative Strength Index near 46 keeps momentum mildly negative, hinting that recent bounces are corrective rather than the start of a sustained advance. On the topside, initial resistance emerges at the 21-day SMA around $4,608.80, followed by the 50-day SMA near $4,658.06, while the 100-day SMA at roughly $4,800.98 marks a higher barrier if buyers regain traction. On the downside, the broader support zone leans toward the mid-$4,300 area, with the 200-day SMA at about $4,382.09 acting as a more substantial floor should sellers extend the current pullback.
Gold prices entered the holiday-shortened week with a recovery target of $4,600 firmly in focus, with XAU/USD trading at approximately $4,578 heading into the Memorial Day weekend. The Memorial Day closure of US equity and bond markets on Monday, May 25 is expected to amplify price swings in gold as liquidity thins significantly — creating conditions in which headline-driven moves on Iran peace deal news could produce exaggerated intraday volatility without the stabilising effect of normal institutional participation.
The Fed Headwind: Rate Hike Bets Weigh on Gold's Upside
Despite Monday's solid bounce, gold's structural upside remains constrained by a markedly hawkish Federal Reserve repricing. Market participants have completely priced out any possibility of a rate cut by the Fed for the remainder of 2026; instead, they are now betting on at least one rate hike before year-end amid rising energy prices and consumer inflation fears. Minutes from the April 28–29 FOMC meeting revealed officials leaning toward keeping rates elevated, or even raising them, if inflation continues to run persistently above the 2% target. The CME Group's FedWatch Tool indicates over a 60% chance that the US central bank will raise borrowing costs by 25 basis points at the December meeting.
As a non-yielding asset, gold historically struggles when interest rate expectations shift hawkishly — making the current dip-buying dynamic all the more notable. Traders appear willing to look through near-term rate hike risk, betting instead on a scenario where a peace deal reduces energy-driven inflation enough to eventually bring the Fed back toward a neutral or dovish stance in 2027.
Gold Price Outlook: $4,600 Next, $5,400–$6,000 by Year-End?
In May 2026, gold prices are expected to range between $4,380.00 and $5,100.00. Experts remain optimistic, forecasting the $5,400.00–$6,000.00 range by the end of the year, driven by geopolitical factors and continued central bank reserve accumulation. The near-term pivot point sits at $4,538, with a confirmed break above the cluster of moving average resistances between $4,608 and $4,800 needed to reignite the broader bull trend.
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In the immediate term, all eyes remain on US-Iran peace negotiations for the next directional catalyst. A confirmed deal could initially send gold lower as the geopolitical risk premium unwinds — but structural buyers, including central banks and ETF investors, are likely to treat any such dip as an opportunity, keeping the long-term bull thesis firmly intact.