The confrontation between the US, Israel, and Iran may end within a week, as it did in 2025, or drag on for a long time, as in 2022. Gold will behave differently depending on how long the conflict lasts. Let’s examine this situation and make a trading plan for XAU/USD.
The article covers the following subjects:
Major Takeaways
- Gold is trying to follow the patterns seen in 2022 and 2025.
- The outlook for XAU/USD depends on how long the conflict lasts.
- The precious metal will also react to the Fed’s monetary policy.
- Selling gold remains relevant on breakouts below $5,040 and $5,000.
Weekly Fundamental Forecast for Gold
To understand what may happen next, it helps to look back. In June 2025, gold surged alongside oil amid the 12-day conflict between the US, Israel, and Iran. After the spike, the metal entered a prolonged consolidation phase. The breakout came when the Federal Reserve launched a monetary easing cycle in September. After that, XAU/USD bulls took full control. The events of 2022 tell a very different story.
Four years ago, hostilities in Ukraine began in late February, sending oil, the US dollar, and gold higher simultaneously. The precious metal came close to a record high. Then the market moved into consolidation until April, followed by a nearly 20% drop in XAU/USD by September.
Gold and US Dollar Performance
Source: TradingView.
The decline in gold came from expectations that high oil prices would push inflation higher and force the Fed to raise interest rates aggressively. That is exactly what happened. However, de-dollarization and central banks’ diversification of foreign exchange reserves helped support gold.
Which scenario will play out this time? The Middle East conflict could end within a week or last much longer, as Polymarket suggests. The prediction market does not expect it to end before May. So far, attempts by the White House to stabilize the oil market have not scared Brent bulls. These measures include providing military protection for tankers passing through the Strait of Hormuz and introducing emergency steps such as allowing India to buy Russian oil. Brent continues to rally, which increases the probability of a 2022-style scenario.
Gold still has several strong support factors. The World Gold Council reports $5.3 billion in ETF inflows in February and expects the uptrend to resume once the Middle East conflict ends. The shutdown of air traffic in Dubai, a major hub for global gold shipments, may lead to supply shortages in India and China. Notably, the UAE is the largest gold exporter after Switzerland.
Largest Gold Exporters
Source: Financial Times.
However, as de-dollarization fades and central banks scale back bullion purchases, XAU/USD bulls are once again confronting their main fear: high Fed interest rates. According to the Atlanta Fed, the derivatives market assigns a 25% probability that rates will remain unchanged through the end of 2026. The probability of one rate cut is 24%, while the probability of two cuts is 12%. There is also a 16% risk that borrowing costs will rise. Such a scenario would be disastrous for gold.
Weekly Trading Plan for XAU/USD
In my view, a strong US employment report for February will push expectations for the next Fed easing move from July to September. This shift would allow traders to build up short positions in XAU/USD opened in the 5,200–5,300 range. The key trigger would be breakouts below the support levels at 5,040 and 5,000.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAUUSD in real time mode
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