Gold Prices Regain Momentum, Will the Rally Last?

Gold prices globally have shown renewed vigour this week after a sharp drop due to easing market concerns over escalating US-Iran conflict. According to Refinitiv, gold closed at $4,535.82 per troy ounce on Friday (29 May 2026), rising 0.98%. For the week, it gained 0.6% week-on-week. Gold had faced pressure earlier, indicating that market participants have not yet fully returned to the asset as geopolitical tensions slightly ease. Diplomatic talks between the US and Iran continue, despite Tehran accusing Washington of serious ceasefire violations. The accusation followed a recent US defensive strike targeting missile sites and vessels near the Strait of Hormuz earlier this week. However, Iranian Revolutionary Guard officials stated on Wednesday that a new war with the US is unlikely. Iran nevertheless affirmed it remains prepared to respond if attacked again. These remarks helped ease market concerns over further Middle East escalation. Hope that the US and Iran may reach a deal also keeps the prospect of reopening the Strait of Hormuz alive. On the other hand, gold continues to struggle as markets view oil price-driven inflation risks as a more pressing short-term threat. Persistent high energy prices could sustain global inflation pressures, leading major central banks, including the Federal Reserve, to maintain tight monetary policy for longer. High interest rate expectations weigh on gold, as it is a non-yielding asset and becomes less attractive when bond yields and interest rates are high. The US economy continues to show robust growth, with inflation remaining unconvincingly low, reinforcing the view that the Fed is unlikely to rush rate cuts. Even if a US-Iran peace deal is reached and the Strait of Hormuz reopens, oil supply normalisation is unlikely to happen immediately. Shipping route recovery could take months, keeping oil prices elevated and inflation concerns persistent. With markets factoring in the Fed’s hawkish stance, gold prices are likely to face downward pressure in the short term. Meanwhile, US personal consumption expenditures (PCE) index rose 3.8% year-on-year in April, in line with market expectations. Monthly, it increased 0.4% in April after a 0.7% surge in March. Independent metals trader Tai Wong noted that weaker US inflation data and news of the Strait of Hormuz reopening provided ‘breathing room’ for gold prices. ‘Gold earlier yesterday morning was at risk of falling below the 200-day moving average, which many investors see as a crucial level to maintain an uptrend,’ he said, quoted by Refinitiv. TD Securities’ global commodities strategist Bart Melek said the PCE data gives the Federal Reserve room to hold rates and avoid further monetary tightening. Previously, the Fed’s April 28-29 meeting minutes revealed growing support among officials for further rate hikes. Gold prices have been pressured since the end of February due to US-Israel tensions with Iran and inflation concerns. Despite being a safe-haven asset, gold tends to be less attractive when rates rise as investors shift to higher-yielding assets. News from China also supported gold, with net Chinese gold imports via Hong Kong surging 81.2% in April compared to the previous month.