29.05.202611:36 Forex Analysis & Reviews: XAU/USD Price Analysis and Forecast: Gold Remains Under Pressure from a Strong U.S. Dollar

On Friday, gold (XAU/USD) is attracting buyers for a second consecutive day, extending its recovery after falling to its lowest level since March 27 in the previous session. During the European trading session, the precious metal climbed to the $4,515 level, near the 9-day Exponential Moving Average (EMA).

However, further upward potential appears limited as market participants await further developments regarding a possible peace agreement between the United States and Iran. According to Axios, citing two U.S. officials, the parties have agreed on a draft document extending the current ceasefire regime for another 60 days. This has eased concerns about prolonged disruptions to oil supplies in the region and has kept oil prices near one-month lows, thereby reducing expectations of tighter monetary policy.

In addition, improving market sentiment is putting pressure on the U.S. dollar, which in turn is supporting demand for gold.At the same time, the proposed peace agreement still requires final approval from U.S. President Donald Trump. Moreover, investors remain skeptical about the prospects for resolving the three-month conflict, given the significant disagreements between the parties over Iran's nuclear program and control of the Strait of Hormuz. The risk of a renewed escalation continues to limit market optimism. This could help prevent further weakness in the U.S. dollar while also capping the upside potential for gold.

Additional caution among U.S. dollar sellers stems from accelerating inflation in the United States, which has reached its fastest pace in three years, largely driven by rising energy prices amid the Middle East conflict. According to data released by the Bureau of Economic Analysis (BEA) on Thursday, the Personal Consumption Expenditures (PCE) Price Index rose to 3.8% year-over-year in April, up from 3.5% in the previous month. The Core PCE measure, which excludes volatile components such as food and energy, increased by 3.3%, in line with market expectations.

The release of these figures reinforced expectations that the Federal Reserve may need to keep interest rates elevated for longer to offset slowing economic activity. Preliminary estimates showed that U.S. GDP expanded by 1.6% on an annualized basis in the first quarter of 2026, below the initial estimate of 2.0%.

Nevertheless, market participants continue to allow for the possibility of further policy tightening. According to CME Group's FedWatch Tool, the probability of a 25-basis-point Federal Reserve rate hike in 2026 is currently estimated at around 50%. This limits investors' willingness to aggressively position for further U.S. dollar weakness or build substantial long positions in gold.

From a technical perspective, XAU/USD showed resilience below the key 200-day Simple Moving Average (SMA) on Thursday and rebounded from that level. Oscillators remain in negative territory, indicating that bears still retain an advantage in the market. Prices also remain below the 50-day and 20-day SMAs, confirming the prevailing downward bias.

However, it is worth noting that gold has not fallen below the 200-day SMA, suggesting that bulls continue to defend this support area and retain a chance of regaining momentum.