The US-brokered ceasefire agreement between Israel and Lebanon has provided short-term support to market sentiment, with investors viewing it as a potential stepping stone toward broader progress in US-Iran negotiations. As safe-haven demand eased somewhat, gold benefited from a technical rebound. However, Hezbollah has rejected key provisions of the agreement, highlighting its fragility. As a result, Middle East risks have not been fully eliminated, limiting gold’s ability to sustain a stronger upward move.

According to data from the World Gold Council, global central banks resumed net purchases of gold in April, adding 17 tonnes. This trend continues the broader reserve-diversification strategy that has been developing over recent years. Even as risk appetite improves, central bank buying continues to provide a solid downside buffer for gold prices.

On the other hand, recent comments from Federal Reserve officials have revealed some policy differences, but overall they reinforce the outlook for interest rates remaining higher for longer, while expectations for rate cuts this year continue to decline. Cleveland Fed President Beth Hammack adopted a relatively hawkish stance, expressing concern that inflation remains too high and may be rising further. She suggested that current policy restrictions may not be sufficiently tight and that action could become necessary if current trends persist. Other Fed officials emphasized that inflation cannot simply be attributed to tariffs or other temporary factors, warning that doing so could damage the Federal Reserve’s credibility.

The core disagreement among policymakers centers on whether the current rise in inflation is temporary or whether it risks becoming embedded within the broader economy. With hawkish voices currently dominating the discussion, the probability of no policy change at the June meeting is close to 100%, while market pricing for aggressive future rate cuts has been scaled back significantly. Higher interest rates and rising real yields continue to create headwinds for non-yielding assets such as gold.

Markets are now focused on the upcoming May Non-Farm Payrolls report scheduled for Friday. Consensus forecasts call for approximately 85,000 new jobs, while the unemployment rate is expected to remain at 4.3%. Recent ADP private-sector employment data showed an increase of 122,000 jobs, suggesting the labor market continues to display resilience. If payroll figures exceed expectations, it would reinforce the view that the labor market remains strong and inflation pressures persist, further supporting expectations for higher rates and weighing on gold. Conversely, weaker-than-expected data could ease concerns about monetary tightening, revive rate-cut expectations, and provide short-term support for gold.

Given the Federal Reserve’s current cautious stance toward inflation, even a weaker payroll report may not be enough to dramatically shift policy expectations in the near term. Its impact would likely be reflected more in short-term volatility than in a major change to the broader outlook.

Gold’s recent technical rebound has been driven primarily by temporary geopolitical easing and continued central bank purchases, while a weaker US dollar has also provided additional support. However, hawkish Federal Reserve commentary, ongoing inflation discussions related to tariffs, and stabilization in the US dollar are all limiting upside potential.

Market Analysis:

Gold continues to consolidate lower on the 4-hour chart timeframe, with both the MACD lines and histogram hovering near the zero axis. Over the longer term, central bank demand remains one of the strongest bullish factors for gold. However, a more sustainable upward trend is likely to require a clear decline in inflation and a renewed rise in expectations for future rate cuts. Investors should closely monitor tomorrow’s Non-Farm Payrolls report, developments in the Middle East, and any additional signals from the Federal Reserve.