Gold Market Outlook: Bullion Struggles Near $4,700 as Middle East Truce Collapses and Rate Cut Hopes Fade

Written by Samer Hasn, Senior Market Analyst at XS.com

Gold is currently trading sideways around the $4,700 per ounce level after experiencing gains it was unable to sustain for long.

The ceasefire between the United States and Iran lasted less than a few hours. Israel's large airstrikes against Lebanon caused Iran to close the Strait of Hormuz again, and Iran did not stop its own attacks in the region either.

The Middle East fronts are interconnected, and any escalation in one area could trigger a more dangerous escalation throughout the region. This war's immediate spark was ignited in Gaza years ago.

While the agreement seems to have been dead on arrival and wasn't meant to succeed from the start, it just looks like a large-scale Trumpian scheme to lower energy prices by any means.

There are many factors that suggest this agreement cannot last. Among these factors is that it can be perceived as a humiliating defeat for Trump, since the war was stopped without the United States achieving any of its objectives, whether regarding the complete neutralization of the nuclear or missile program or the overthrow of the regime, while Iran still maintains its will to fire the last shot in the war. According to the WSJ, senior U.S. officials and allies are concerned that President Trump’s declaration of total victory may be premature despite a fragile ceasefire. While the administration frames the five-week operation as a military triumph that decimated Iran’s air defenses and navy, Tehran remains capable of threatening maritime traffic.

Defense Secretary Pete Hegseth and Joint Chiefs Chairman Gen. Dan Caine presented contrasting views on the status of the conflict following the announcement of a two-week ceasefire, according to The Washington Post. While Hegseth declared a "capital-V military victory," claiming that Operation Epic Fury had decimated Iran's combat effectiveness, Caine remained cautious, calling the agreement a "pause" rather than a conclusion. Despite the bravado, the Pentagon faces unresolved challenges regarding Iran's uranium stockpiles and the contested Strait of Hormuz.

The market's growing awareness of the truce's fragility is likely to deepen concerns about the Federal Reserve's ability to cut interest rates this year. After a brief moment of optimism yesterday regarding a potential quarter-point reduction, the market has shifted back to showing considerable doubt about the likelihood of any rate cuts in 2026, according to CME FedWatch Tool data.

Besides, the current conflict threatens a structural attrition of physical gold demand across the Middle East, a region that significantly outpaces the U.S. in domestic consumption. While the Middle East accounted for 10% of global jewelry demand and 9% of the bars and coins segment in 2025, compared to just 8% and 4% respectively in the U.S., wartime pressures may now force a pivot toward cash liquidity. Unlike other volatile markets, the direct pegging of most GCC currencies to the U.S. dollar helps maintain domestic monetary stability, discouraging the precautionary hoarding often seen during regional crises. Consequently, the rising costs of essential goods may lead consumers to prioritize immediate solvency over bullion accumulation.

As long as the ceasefire in the region remains unstable, individuals' preference for liquidity may continue, potentially weakening gold's upward momentum.

Gold Technical Outlook (XAUUSD)

Technically, on the 4-hour timeframe, gold is approaching the key demand zone at the bullish order block at 4,686.41 and 4,608.62 while trading inside the ascending channel. If gold hold the support of the current support lines, buyers’ attention might remain on the bearish Fair Value Gap (-FVG) anchored between 4,899.24 and 4,977.46. 

On the upside, if gold broke above the current -FVG and the upper bound of the channel, this may turn buyers’ eyes to the bearish order block (-OB) situated between 5,379.04 and 5,419.42.

On the downside, if the metal rejected this supply and broke below the immediate dynamic line and the bullish order block at 4,686.41 and 4,608.62, this may turn sellers’ attention to the 0.786 Fibonacci level at 4,419.89 or the bullish order block (+OB) anchored between 4,306.08 and 4,379.30.

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Disclaimer: The chart reflects the analyst's opinion and does not constitute investment advice. Past performance is no guarantee of future returns. Seek independent advice before making decisions