Gold (XAU/USD) started the week lower after rebounding on Friday from near $4,550. It has fallen for a second day as expectations of higher global interest rates and a firmer US Dollar weigh on non-yielding gold. Energy prices have risen on supply risk linked to the war, which has fed expectations of renewed inflation pressure and tighter central bank policy. Crude Oil reached a nearly four-week high after US President Donald Trump threatened to target Iran’s power plants and bridges if the Strait of Hormuz is not reopened by Tuesday.

Geopolitical Supply Risks

Iran said transit could resume if part of the revenue is used to compensate for war-related damage. Ali Akbar Velayati, an adviser to Iran’s new Supreme Leader Mojtaba Khamenei, said the Bab el-Mandeb Strait could also be targeted, raising concerns over trade disruption. A strong US Nonfarm Payrolls report on Friday supported views that the Federal Reserve may keep rates higher for longer. Gold has held above support near $4,600, and markets are watching the US ISM Services PMI, with Easter Monday reducing liquidity. Technically, $4,600 is the 38.2% Fibonacci retracement of the March fall, while price remains below the 200-period EMA. MACD is below its signal and under zero, RSI is 52, resistance sits at $4,758, then $4,791 and $4,913, with support at $4,411 and $4,300. We see gold struggling as the market prioritizes the threat of higher interest rates over the clear geopolitical risks from Iran. The strength in the US dollar, reinforced by Friday’s strong jobs report, is building the case for a more aggressive Federal Reserve. For now, this suggests the path of least resistance for gold is to the downside. We believe that positioning for a move below the $4,600 support level is the most direct strategy for the next few weeks. The March Federal Open Market Committee minutes confirmed this hawkish bias, with a majority of members anticipating at least two more rate hikes in 2026. Considering the latest CPI data for March 2026 showed inflation remains sticky at 3.8%, conditions are not favorable for non-yielding assets.

Options Strategy Outlook

Given this outlook, buying put options with strike prices near $4,500 and $4,400 seems appropriate to capitalize on a potential break of current support. This setup reminds us of the price action in the third quarter of 2025, when an initial geopolitical rally in precious metals was quickly erased by central bank hawkishness. For those wanting to reduce premium costs, a bear put spread could achieve a similar directional exposure. However, the threats to the Strait of Hormuz and the Bab el-Mandeb strait introduce a high degree of uncertainty that could cause a violent price reversal. The Cboe Gold Volatility Index (GVZ) has already climbed to 18.5, up from the low 14s earlier in the year, indicating the market is bracing for larger swings. Therefore, a long strangle strategy, which profits from a significant move in either direction, could be a valuable position to hold. Create your live VT Markets account and start trading now.

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