Gold (XAU/USD) traded higher on Monday as it rebounded from last week’s low near $4,450 to a session peak of $4,579, while the US Dollar Index slipped back to the bottom of its prior range. Price action followed comments from US President Donald Trump and Secretary of State Marco Rubio indicating some progress with Tehran, though officials ruled out an immediate breakthrough. Washington also said the US blockade of the Strait of Hormuz would stay in place until any agreement is completed.
Iran’s Foreign Ministry said talks are focused on ending the war, with nuclear negotiations excluded, and repeated that the Strait of Hormuz should be run by coastal states. Technically, XAU/USD was around $4,572, with an inverted Head and Shoulders formation in play; the neckline sits near $4,575, and last week’s range top is around $4,590. Momentum gauges were firmer, with RSI at 58.93 and MACD holding in positive territory; upside levels sit near $4,640 and May’s peak around $4,770, while support is seen around $4,530, then $4,450, and March 23 lows near $4,350. Central banks added 1,136 tonnes of gold worth about $70 billion in 2022, according to the World Gold Council.
Price Action and Trading Strategy
The current price action is forming a bullish inverted head and shoulders pattern, which suggests a potential move higher. We are closely watching the neckline resistance area between $4,575 and $4,590. A decisive break above this zone in the coming days would be our signal to add to bullish positions.
A sustained move above $4,590 would prompt us to consider buying call options with strike prices near $4,650, targeting the May highs. This view is supported by the weakening US Dollar Index, which has fallen over 1.5% in the last two weeks. This dollar weakness provides a significant tailwind for gold prices.
We must remain disciplined, as progress in US-Iran negotiations could create short-term headwinds for gold as a safe-haven asset. If the price fails to break the neckline and instead falls below last week’s low of $4,450, the bullish setup would be negated. In that scenario, we would look to exit long positions and potentially purchase puts to hedge against a deeper slide toward $4,350.
Broader Market Outlook and Fundamentals
Beyond the short-term chart, the bigger picture remains supportive for holding gold derivatives. Central banks have continued their aggressive purchasing, adding 290 tonnes in the first quarter of 2026 alone, providing a strong floor for the market. With US inflation still persistent at 2.8%, gold’s role as an inflation hedge remains highly relevant.
The current interest rate environment is also a key factor in our strategy. As recent economic data suggests the Federal Reserve may pause its rate-hiking cycle, the opportunity cost of holding a non-yielding asset like gold decreases. This makes gold more attractive compared to bonds, a trend we expect to continue in the coming weeks.
