Strike while the iron is hot. Gold seems to have taken that proverb to heart and is climbing for the third session in a row, reaching a monthly high. A softer dollar and falling oil have created near?perfect conditions for XAU/USD, but investors are holding off on celebrating and anxiously await US employment data, which will settle questions about the Fed's future rate path.

Markets continue to weigh the conflicting rhetoric from Washington and Tehran. Qatar says mediators have made progress toward ending the war, while Iran denies President Trump's claims that talks are even taking place. Axios reports the US, Iran, and Oman are close to an agreement to normalise shipping through the Strait of Hormuz, with an announcement possibly coming as soon as Wednesday. Any progress there would likely push oil lower, ease inflation fears and send bond yields down — all of which gold would welcome.

Oil and gold dynamics

The precious metal remains linked to oil: crude price swings are still an important indicator of global inflationary pressure for gold. If a clear de-escalation roadmap appears, XAU/USD would have reason to extend its rally.

Markets have already pared back expectations for Fed tightening this year from two hikes to one. Less monetary restriction traditionally favors gold, which pays no interest and suffers when borrowing costs are high.

Capital flows into Chinese ETFs

Meanwhile, a real sentiment shift is occurring in the physical market. China's institutional investors have funneled capital into gold-oriented ETFs for 14 consecutive days — the longest streak since March. Shanghai prices are trading at a modest premium to the London benchmark, making offshore purchases of metal more attractive for banks. The Bank of Korea has returned to buying gold, and Asian ETF inflows confirm a shift in sentiment in the East after a prolonged period of sell?offs driven by the Middle East conflict.

Central bank buying, geopolitical uncertainty, and dedollarisation remain the bulls' main trump cards for gold. However, the futures market is still priced for tighter policy — implied rates rise through 2027. Will the US-Iran conflict resolve quickly enough to overturn those expectations?

Technically, on the daily chart, gold is attempting to breach the upper band of the $3,965–$4,165/oz consolidation range. Success would allow the bulls to move into a trend phase, justify fresh buying and increase the probability of a Wolf Wave pattern playing out, with targets near $5,215.