Gold drops as markets cheer Middle East ceasefire – but for how long?

Gold prices are facing renewed pressure as markets cautiously celebrate a declared ceasefire between Iran and Israel. The price of XAU/USD has dropped below its 20-day simple moving average, a key technical indicator, reflecting a shift away from safe-haven assets and into riskier options like equities. The Relative Strength Index (RSI) has also fallen below 50 for the first time since mid-May, when gold saw a deeper correction down to $3,120.

Despite the pullback, the move appears to be relatively controlled. Long-term fundamentals supporting gold remain intact, though technical traders are now eyeing the $3,330 level as a key support zone. A decisive move below this threshold could signal a deeper retracement and a change in market sentiment.

Gold (XAU/USD) daily chart

(Past performance is not a reliable indicator of future results)

The broader market response to Iran’s recent military action has been surprisingly subdued. The attack—targeting a U.S. military base—was expected to rattle investors, yet the global reaction has been more one of tentative relief than alarm. This suggests the strike was largely symbolic rather than escalatory in nature, limiting its impact on financial markets.

Adding a layer of finality to the episode, former U.S. President Donald Trump announced that a ceasefire had been reached, dubbing the event the “Twelve-Day War.” His statement implied that the conflict had effectively concluded, though many geopolitical analysts caution that this may be an overly optimistic interpretation.

Prior to the agreement, Trump emphasized the absence of American casualties and praised Iran for issuing a prior warning:

“I want to thank Iran for giving us early notice, which made it possible for no lives to be lost. Most importantly, they’ve gotten it all out of their ‘system,’ and there will, hopefully, be no further hate. Perhaps Iran can now proceed to peace and harmony in the region, and I will enthusiastically encourage Israel to do the same.”

While intended to calm tensions, these remarks may have unintended political consequences. Public praise from a former U.S. president could weaken Tehran’s domestic narrative that the attack was a powerful and deliberate move. Instead, it may appear conciliatory, even orchestrated, potentially undermining the regime’s posture both at home and in the broader region.

This raises broader questions: Are these confident declarations of de-escalation premature? And how can such a significant event—a direct confrontation many feared might spiral into a regional war—elicit such a subdued response compared to earlier crises?

The disparity in global reaction suggests a shifting global perspective. Geopolitical threats may still carry weight, but market participants increasingly appear to differentiate between symbolic posturing and genuine escalation. Whether this ceasefire marks a true turning point or simply a pause in hostilities remains to be seen.