NextFin News - Gold prices surged more than 3% on Friday, reclaiming critical technical levels as a breakdown in Middle East diplomatic efforts triggered a wave of safe-haven buying and opportunistic "dip-buying." Spot gold climbed 2.6% to settle at $4,491.78 per ounce by 1:45 p.m. ET, after touching an intraday peak of $4,554.39. The rally marks a sharp reversal from Monday’s four-month low of $4,097.99, illustrating the extreme volatility currently gripping the precious metals market as geopolitical risks collide with shifting monetary expectations.
The immediate catalyst for the price action was the rejection by Tehran of a 15-point U.S. proposal aimed at reopening the Strait of Hormuz. U.S. President Trump had extended a deadline for Iran to comply, but the subsequent impasse has heightened fears of a broader regional escalation. With the conflict now entering its fourth week, the economic ripple effects are becoming impossible to ignore. Brent crude remains stubbornly positioned above $110 per barrel, fueling a global inflationary cycle that is complicating the policy path for major central banks.
Daniel Pavilonis, a senior market strategist at RJO Futures, characterized the recent price drop below the 200-day moving average as an "incredible time to buy gold." Pavilonis, who has historically maintained a constructive view on gold during periods of geopolitical instability, noted that the technical breach provided a necessary entry point for institutional investors. While his outlook suggests a gradual upward trend in the coming weeks, he cautioned that any sudden de-escalation in the Middle East could pivot the market back toward a "risk-on" environment, potentially stalling gold’s momentum.
This bullish sentiment is echoed by Commerzbank, which recently raised its year-end gold target to $5,000 per ounce from $4,900. Analysts at the bank argue that the current pullback is transitory and that the Federal Reserve may be forced to pivot back to interest rate cuts later this year if the conflict subsides and economic growth slows. Commerzbank’s projection of 75 basis points in cuts by mid-2027 stands in direct opposition to current market pricing, which has largely abandoned the possibility of any U.S. rate cuts in 2026.
The divergence in expectations highlights the significant uncertainty facing the market. According to the CME Group’s FedWatch Tool, traders have fully priced out rate cuts for the remainder of the year, a stark shift from just a month ago when two cuts were widely anticipated. Higher interest rates typically weigh on gold by increasing the opportunity cost of holding non-yielding assets. If the Federal Reserve maintains a hawkish stance to combat energy-driven inflation, the current rally could face stiff resistance near the $4,600 level.
The appetite for safety extended across the precious metals complex on Friday. Spot silver rose 2.2% to $69.54 per ounce, while platinum and palladium recorded gains of 2.3% and 1.8% respectively. These moves suggest that while gold remains the primary beneficiary of geopolitical anxiety, the broader sector is being lifted by a collective hedge against a worsening global economic outlook. The sustainability of this rally now rests on whether the Middle East conflict remains contained or spirals into a deeper disruption of global trade routes.
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