Gold rose on Wednesday but slipped from a three-week high of $4,857, and traded near $4,735, up over 0.70%. Falling Oil prices weakened the US Dollar, with the US Dollar Index (DXY) down 0.60% to 98.91, a four-week low.
The US and Iran agreed to a two-week ceasefire on Tuesday, with talks due in Pakistan on Friday. Donald Trump said the truce depends on Iran reopening the Strait of Hormuz and said he received a 10-point proposal from Iran.
Geopolitical Developments And Market Impact
Israel and Iran continued exchanges, and Israel also attacked Hezbollah positions in Lebanon. Kuwait and Saudi Arabia reported damage to energy facilities from attacks by Tehran.
Iran said the Strait of Hormuz remains shut, though a senior official said it could reopen on Thursday or Friday if a ceasefire framework is reached. Fars News Agency reported Oil tanker passage through the strait is halted in response to Israel’s actions in Lebanon.
West Texas Intermediate (WTI) is down nearly 14%, below $95.00 per barrel. Money markets now price in nearly 10 basis points of Federal Reserve easing by year-end, according to Prime Market Terminal.
Upcoming US releases include weekly jobless claims, Q4 2025 GDP (final), and the Core PCE Price Index. Gold faces chart levels at the 50-day SMA of $4,779, the 20-day SMA of $4,723, support at $4,700, the 100-day SMA of $4,620, and the 2 April low of $4,554.
Trading Implications And Strategy Setups
Based on the recent truce announcement, we see the plunge in WTI crude oil below $95 as an overreaction, creating a prime opportunity for volatility trades. The ceasefire is conditional on the reopening of the Strait of Hormuz, which handles over 20% of global petroleum liquids trade, and remains a significant uncertainty. We should consider buying options straddles on oil futures, which would profit from a sharp price move in either direction if negotiations succeed or fail in the coming weeks.
Gold’s position is more complex, making directional bets risky right now. The falling dollar and new expectations for a Fed rate cut are supportive, but the easing geopolitical tension is a major headwind. We should look at selling premium through options, perhaps using an iron condor strategy on XAU/USD futures with wings set outside the recent $4,554 to $4,857 range to collect income from elevated volatility.
The market’s rapid repricing of Federal Reserve policy, moving from a hold to pricing in rate cuts, is the most important macro shift. This was a direct response to the energy shock abating, a dynamic we last saw with the inflation spikes of 2022. We can express this view by using derivatives on SOFR futures to bet on lower short-term interest rates by the end of the year.
The U.S. Dollar Index (DXY) falling to 98.91 signals a clear breakdown, and we expect this weakness to persist if inflation data confirms a downward trend. The upcoming Core PCE report will be a critical test for this thesis. In the meantime, buying puts on the dollar or calls on the Euro would be a direct way to position for a continued slide.
Ultimately, all these positions hinge on the fragile peace talks set for this Friday in Pakistan. We must remember how quickly the landscape shifted during the conflicts of 2025, where ceasefires collapsed within days. Our derivative positions should therefore be structured with short-term expiries, allowing us to capitalize on the immediate uncertainty without being exposed to a complete reversal in a month’s time.
