Geopolitical Risks And Inflation Expectations
US President Donald Trump said stopping the “evil empire” in Iran mattered more than oil prices. Crude prices have risen since the start of the US-Israel war on Iran, while concerns about Strait of Hormuz disruption added to inflation worries and reduced expectations for Fed cuts in 2026. Higher US Treasury yields supported the Dollar and limited gold’s gains ahead of the US Personal Consumption Expenditures (PCE) Price Index. Markets also watched the Core PCE, the Fed’s preferred inflation gauge, which excludes food and energy. On charts, gold rebounded near the 200-period EMA on the 4-hour timeframe, keeping the broader uptrend intact. MACD stayed below zero, RSI was near 44, with support at $5,090 and $5,039, then $5,000, and resistance at $5,160, $5,200 and $5,230. A strong US Dollar is putting pressure on gold, as we are accepting that the Iran conflict, which began in 2025, is reigniting inflation. The latest US Consumer Price Index (CPI) reading for February, released just this week, showed inflation re-accelerating to 4.1%. This makes it very unlikely the Federal Reserve will move to cut interest rates anytime soon.Key Levels And Volatility Outlook
Crude oil has been trading stubbornly above $115 per barrel for most of this quarter, a direct result of the war and fears surrounding the closure of the Strait of Hormuz. This has forced us to rapidly re-evaluate the Fed’s path, with markets now pricing in less than a 15% chance of a rate cut by June. This ongoing situation props up US Treasury yields, which competes directly with non-yielding gold. Despite this pressure, gold finds support from the very same geopolitical risk. The threats from Iran’s new leadership are being taken seriously, especially after reports of Iranian-backed naval drones harassing tankers near the Strait of Hormuz last week. This underlying tension creates a solid reason to hold gold as a hedge against a wider escalation. Given these powerful opposing forces, volatility appears to be the most sensible trade in the coming weeks. A sharp move could be triggered by either the upcoming PCE inflation data or a sudden military development. Strategies like long straddles or strangles on gold futures or related ETFs could perform well in this uncertain environment. We are watching the $5,039 to $5,090 range as a critical support level. A decisive break below this zone would suggest that inflation and rate fears are winning out, potentially pushing prices toward the $5,000 mark. Conversely, a sustained move above the $5,160 resistance would signal that safe-haven demand is taking control. Create your live VT Markets account and start trading now.
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