Trust, but verify. Gold's muted response to White House statements about a final phase of talks between the United States and Iran reflects investor skepticism. Similar episodes have occurred when President Donald Trump announced an imminent end to the Middle East conflict, only for his words to amount to little. This time the outcome could be different, which encourages XAU/USD bulls to take action.

The recent sell-off in gold has been driven primarily by an adverse external backdrop. The dollar and US Treasury yields rose after markets increased the probability of tighter Federal Reserve policy amid a spike in oil prices and rising inflation expectations. According to the University of Michigan, long-run inflation expectations rose in May to a seven-month high on the 5–10-year horizon.

In theory, a fall in Brent amid the end of the Middle East conflict would slow inflation, cause the Fed to hold rates and ultimately to ease policy, and push Treasury yields lower. In reality, the outcome may be different.

US Treasury yield dynamics

US public debt is growing rapidly as President Trump pursues tax cuts. Deteriorating fiscal metrics and stimulative measures will increase Treasury issuance, prompting investors to demand a higher risk premium. Yields are therefore rising.

It is not certain that the US dollar will fall sharply. Brent will certainly decline, but not at the pace the White House would like. Gulf states must repair damaged infrastructure and other consumers must replenish sharply depleted inventories. The market generally believes that North Sea benchmark levels are unlikely to be restored before late 2026.

Consequently, US inflation risks becoming anchored at elevated levels. That would force the Fed to adjust its language. To date the central bank has talked about easing as the next step. Christopher Waller, a Fed governor, has challenged that view, arguing that communications should include the possibility of both rate cuts and rate increases depending on developments.

Thus, the fate of XAU/USD continues to hinge on the Middle East conflict. If Mr. Trump's assurances of a quick resolution once again proven unfounded, gold will resume its decline. By contrast, a diplomatic settlement would shift focus to the rate at which oil prices and inflation expectations fall, and from there to subsequent Fed actions, the dollar and Treasury yields.

Technically, on the daily chart, XAU/USD shows bulls preparing to test dynamic resistance represented by moving averages. A successful breakout would complete the correction within the uptrend and create buying opportunities with targets at $4,695 and $4,990 per ounce.