Ceasefire Expectations Boost Gold Bulls, March NFP Could Trigger Volatility

Recently, as ceasefire expectations in the Middle East have picked up again, sentiment in the gold market has clearly improved, with bulls re-entering. Traders are beginning to reassess the trajectory of the conflict and gradually price in the possibility of a de-escalation in risk.

Looking ahead, while markets continue to monitor geopolitical developments, attention is also shifting toward Friday’s U.S. March nonfarm payrolls report. Any meaningful deviation between actual data and expectations could significantly amplify gold volatility.

Technical Outlook: Key Level Break, Watch for Follow-Through

On the daily chart for XAUUSD, gold surged 3.5% on Tuesday and successfully closed above the key resistance level of $4,660, indicating a notable strengthening in short-term momentum.

If bullish momentum continues, the $4,850–$4,900 range could serve as the next key resistance zone. On the downside, the $4,500–$4,510 area is expected to provide initial support. A break below this range could see downside pressure intensify, with prices potentially testing the $4,350 level.

Ceasefire Expectations Underpin the Rally

From a fundamental perspective, the latest rebound in gold has been primarily driven by shifts in geopolitical signals. Media reports on Tuesday, along with statements from Trump, suggested that even if the Strait of Hormuz faces potential closure, the U.S. is willing to end its actions against Iran. At the same time, Iran indicated it would be open to ending the conflict, provided certain guarantees are in place.

Compared to the previous dynamic of largely one-sided U.S. messaging, both sides now appear to be showing some degree of alignment. As a result, the market narrative is gradually shifting from concerns around rising inflation and slowing growth to expectations of a potential end to the conflict and a moderation in geopolitical risk.

These expectation shifts have translated directly into asset pricing. On one hand, easing inflation expectations have weighed on the U.S. dollar, supporting dollar-denominated gold. On the other hand, continued safe-haven flows into U.S. Treasuries have pushed yields lower, enhancing the relative appeal of non-yielding assets like gold.

It is also worth noting that since the outbreak of the conflict, gold has at times behaved more like a risk asset. With broader equity sentiment improving, the recovery in risk appetite has also supported gold at the margin.

Geopolitical Risks Persist, Expectations Face Validation

Despite signs of easing, the geopolitical situation has yet to show a substantive turning point. U.S. and Israeli strikes against Iran are ongoing, and there are reports that the UAE may assist the U.S. in forcibly reopening the Strait of Hormuz, highlighting continued uncertainty in the region.

At its core, the current rally in gold is being driven more by shifting expectations than by a material improvement in fundamentals. If ceasefire expectations fail to materialize, oil prices could remain elevated, allowing inflation and growth concerns to reassert themselves, thereby restoring the previous market narrative.

In addition, some emerging market central banks may continue to sell gold in the near term to stabilize their currencies, which could also weigh on prices.

Focus on NFP: Volatility Could Pick Up

Overall, the current rebound in gold appears to be driven largely by short covering and position rebalancing, with a “full fundamental improvement” yet to be confirmed.

Should there be tangible progress on geopolitical easing, alongside a sustained decline in oil prices, lower market volatility, and a recovery in risk appetite, gold’s upside could become more durable.

In the near term, the March U.S. nonfarm payrolls report will be a key focal point. Market expectations are for payroll growth of 60,000 (previous: -92,000), with the unemployment rate holding at 4.4%.

Against a backdrop of fragile sentiment, markets may be particularly sensitive to downside surprises. If the unemployment rate rises to 4.5% or above, stagflation concerns could complicate the pricing of the Fed’s policy path, potentially amplifying gold price volatility.

Additionally, with Good Friday falling this week, U.S. and European equity markets will be closed. Traders should remain mindful of potential volatility stemming from position adjustments. In this environment, risk management remains more important than aggressively positioning in one direction.