Gold: “New Hope”

Hopes for a de-escalation in the Middle East are driving up gold prices. Michael Blumenroth analyzes market reactions and interest rate expectations.

May 7, 2026. FRANKFURT (Xetra-Gold). For logistical reasons (the podcast is being recorded on Thursday morning at the Frankfurt Stock Exchange), I have to start writing (electronically) as early as Wednesday afternoon this time. And, lo and behold, hopes have been growing in the financial markets since Wednesday morning for an official end to hostilities in the Middle East. Media reports indicated negotiations on a memorandum between the U.S. and Iran intended to bring a definitive end to the fighting, which had been temporarily halted by the ceasefire. Market reactions were correspondingly strong: Oil prices fell by more than seven percent. At the same time, government bond yields dropped, the US dollar came under downward pressure, and gold prices gained momentum. In other words, exactly the reactions we have seen time and again in recent weeks whenever hopes of a de-escalation of the Middle East conflict have emerged.

Fed and ECB Interest Rate Decisions Influence Gold Prices

Toward the end of last week, gold prices faced some headwinds. This was because markets interpreted the outcome of the U.S. Federal Reserve’s meeting to mean that interest rate cuts in the U.S. would likely be put on hold for the time being. In addition, ECB President Christine Lagarde noted a day later that the ECB had already discussed potential interest rate hikes during its meeting last Thursday, even though rates remained unchanged for the time being. However, the markets firmly expect an interest rate hike in mid-June and are pricing in further rate hikes by the end of the year. This initially kept gold prices in check..

Gold Price Caught Between Geopolitical Risks and Interest Rate Speculation

While gold was trading at around $4,570 per ounce on Thursday morning of last week, it closed the week at $4,615 on Labor Day. On Monday, oil prices initially rose sharply, and bond yields also continued their upward trend, causing gold to trade at its low for the week so far, around $4,501. On Wednesday, optimism returned to the markets in a big way (see above), causing gold to rise from $4,550 at the start of the day to $4,710 per ounce by noon.

Weekly Price Trend for Xetra-Gold

The price of Xetra-Gold also rose: During regular trading hours, it fell from €125.90 per gram at the start of trading last Thursday morning to around €124.10 on Monday afternoon. Prices hovered around €126 throughout Tuesday before rising to about €128.70 per gram by Wednesday afternoon.

Outlook: Focus on the Middle East situation and U.S. labor market data

Developments in the Middle East remain the key factor in the short term. If the situation does indeed de-escalate sustainably, this could further boost the gold price. The data on the development of the U.S. labor market in April, due for release on Friday, is also likely to be of interest.

I wish all readers a cooler, but hopefully sunny, weekend.