Gold (XAU/USD) rose to about $4,045 in early Asian trading on Thursday, rebounding from a near seven-month low as markets digested comments from Federal Reserve chair Kevin Warsh and awaited June US employment data due later in the day. Speaking at the European Central Bank’s annual forum in Portugal on Wednesday, Warsh said inflation expectations had moderated over the past month and reiterated the Fed’s focus on restoring price stability, which markets read as lowering the odds of a near-term rate rise. A less hawkish tone has supported the non-yielding metal via a softer US Dollar (USD) and lower bond yields.
Gold also drew support from developments in US-Iran talks. Qatar said on Wednesday that US and Iranian negotiators made “positive progress” on issues linked to a memorandum of understanding and agreed to continue discussions, while US Vice President JD Vance said talks in Doha were “going well” and that nuclear discussions would begin soon. Separately, central banks added 1,136 tonnes of gold worth around $70 billion to reserves in 2022, according to the World Gold Council, the highest annual purchase since records began.
Market Reaction and Trading Strategies
With gold reaching $4,045, we see the market reacting to a less aggressive Federal Reserve. The recent commentary suggests policymakers are in no rush to raise interest rates, which lowers the appeal of holding US dollars and bonds. For the coming weeks, we believe buying call options or establishing long futures positions is a prudent strategy to capitalize on this momentum.
All attention now shifts to the US employment report due today, July 2nd. A weaker-than-expected jobs number, perhaps below the 160,000 consensus forecast, would likely reinforce the Fed’s patient stance and push gold higher. We are preparing for increased volatility around the release, considering strategies like straddles that profit from a large price move in either direction.
Broader Economic Picture and Institutional Support
The broader economic picture supports a bullish outlook for gold. Recent data shows Core PCE inflation, the Fed’s preferred gauge, has cooled to 2.6%, easing pressure for further rate hikes. This sustained trend makes holding a non-yielding asset like gold more attractive for the medium term.
We also observe strong underlying support from institutional players. The latest Commitment of Traders report shows speculative net-long positions in gold futures are at a six-month high, indicating strong bullish sentiment. Furthermore, central banks continued their aggressive buying, adding a net 290 tonnes in the first quarter of 2026, which creates a solid floor under the market.
While positive news from US-Iran talks could create some headwinds by reducing safe-haven demand, the primary driver for gold remains the US dollar. The US Dollar Index has weakened by 1.5% over the past two weeks as the market prices in potential rate cuts later this year. As long as this trend continues, we expect any dips in the gold price to be viewed as buying opportunities.
