Gold is trading slightly higher today, up around 0.2%, recovering above $4,200/oz following yesterday’s surge of more than 3%.
The ongoing rise in gold prices stems from surging market optimism about a potential Middle East peace agreement, which could ease concerns about higher-for-longer interest rates and Treasury yields.
This recovery follows reports of an upcoming memorandum of understanding that could soon be finalised to halt the conflict.
However, optimism lacks a solid foundation regarding the commitment of both parties to finalise a deal, leaving the yellow metal prone to further downward pressure.
Reports from Axios indicate that Washington and Tehran have settled on a draft memorandum of understanding that establishes a sixty-day ceasefire across all fronts, including Lebanon, reopens the Strait of Hormuz, and sets a framework for future nuclear discussions.
Diplomatic sources noted the draft addresses key atomic details acceptably, while preparations are reportedly underway for Vice President JD Vance to travel to Europe to sign the deal. Furthermore, the Wall Street Journal reported narrowing differences between the parties, with an official noting that Tehran provided assurances to President Trump that align closely with his conditions.
Despite these Western assertions, Tehran has refrained from verifying the progress, with its Foreign Ministry spokesperson labelling the reports speculative and emphasising that Iran has not abandoned its red lines. The spokesperson cautioned that Washington frequently alters its stance as discussions advance, meaning the threat of renewed conflict remains high without a legally binding signature.
Because this framework merely defers deep-seated disputes over frozen assets and nuclear capabilities to future talks rather than settling them immediately, any breakdown would quickly reignite regional warfare, threaten the fragile Lebanon front, and restore gold’s bearish downturn. Consequently, this temporary diplomatic window may ultimately serve as a brief pause before hostilities resume.
Furthermore, the major physical gold funds are not attracting new inflows and continue to record outflows, which suggests Wall Street is not moving to buy gold yet. For instance, the iShares Gold Trust (IAU) recorded outflows yesterday, even amid the recovery wave the yellow metal entered. This reinforces the idea that yesterday’s speculative push for gold was fragile and could quickly disappear or reverse if hope is renewed about ending the war. This comes at a time when the US economy remains strong, with sufficient resilience to handle energy shocks, as was evident in the recent batch of employment and wage data. This keeps stocks and bonds attractive and reduces the importance of assets that do not pay income, such as gold. Furthermore, liquidity could be disrupted today as the market awaits SpaceX’s initial public offering, which is expected to raise $ 75 billion.
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