Gold rose on Monday as easing geopolitical risk in the Middle East weighed on the US Dollar and crude, pushing XAU/USD to about $4,572, up 1.40% on the day. Markets reacted to renewed talk of a US-Iran understanding, with reports pointing to a 60-day ceasefire extension, the reopening of the Strait of Hormuz and the lifting of a US naval blockade on Iranian ports, while nuclear negotiations continue. WTI fell more than 5% as the headlines crossed, and the US Dollar Index (DXY) slipped back towards 99.00, shifting attention to how lower energy prices could temper inflation risks and, in turn, the Federal Reserve’s rate path. Futures pricing implies nearly a 40% probability of a 25 basis point hike at the Fed’s December meeting.
Technically, gold is holding above the 200-day SMA near $4,381 but remains capped by the 100-day SMA around $4,800. The RSI is near 44, while MACD is below zero with a mildly negative histogram, consistent with range trading. Nearby support sits around $4,500, then just above $4,381, while a break over $4,800 would bring $5,000 into view. Central bank purchases totalled 1,136 tonnes worth around $70 billion in 2022. Later this week, focus turns to the US PCE inflation report on Thursday and speeches from Fed officials.
Market Drivers and Gold Strategy in Response to US-Iran Talks
The developing situation with the US-Iran negotiations is the primary driver for our strategy in the coming weeks. We see a clear inverse relationship where positive news on a deal weakens the US dollar and oil, directly benefiting gold. We will be positioned to react quickly to headlines as they emerge from these talks.
The sharp drop in WTI crude oil, which has now fallen over 7% this week to trade around $84 per barrel, is the most immediate market impact. This eases the significant inflation fears that have been building pressure on the Federal Reserve. We believe this fundamentally alters the risk of an energy-driven inflation shock for the second half of the year.
This shift is already being reflected in interest rate expectations, with the probability of a December Fed rate hike dropping from 40% to just below 32% in the last 24 hours, based on CME FedWatch data. For a non-yielding asset like gold, a less aggressive Fed is a distinctly bullish signal. We are looking at derivative strategies that can profit from this change in monetary policy outlook.
Option Strategies, Technical Levels, and Central Bank Support
Given the potential for a sharp upward move if a deal is finalized, we are considering buying out-of-the-money call options on gold. A call option with a strike price just above the 100-day moving average of $4,800 would provide significant upside leverage on a breakout. This strategy allows us to capitalize on positive news with a clearly defined and limited risk.
However, since negotiations could still fail, we must also consider the downside. We view put options on crude oil futures as an effective hedge against a breakdown in talks. If the deal collapses, a resulting surge in oil prices would likely cause gold to pull back, but our oil puts would gain in value and offset those losses.
We are using the technical chart levels to set our parameters for these trades. We see the 200-day moving average around $4,381 as a solid floor for placing protective stop-losses. The resistance at the $4,800 mark remains the key trigger we are watching to add to our long gold positions.
The underlying support from central bank demand also gives us long-term confidence. Recent data from the World Gold Council for the first quarter of 2026 confirmed that central banks bought a net 290 tonnes, marking the strongest start to a year on record. This persistent buying provides a strong foundation under the market, suggesting any price dips will be well-supported.
This week, all eyes will be on the US Personal Consumption Expenditure (PCE) inflation report this Thursday. A softer inflation reading would further validate the market’s reduced rate hike expectations and could provide another catalyst for gold to test its upside resistance. We will remain nimble and ready to adjust our positions based on that key data release.
