Gold rose on Friday as hopes of a US-Iran deal and reports that the Strait of Hormuz is “completely open” helped push oil prices lower. XAU/USD traded near $4,870, up about 1.67% on the day, and was set for a fourth straight weekly gain.
WTI fell to its lowest level since March 11 and traded around $81.50, down nearly 9% on the day. The US Dollar Index was near 97.73, at more than one-month lows and heading for a third consecutive weekly decline.
Lower oil prices eased near-term inflation concerns and supported expectations of Federal Reserve rate cuts later this year. Markets also watched for updates on weekend US-Iran talks, while the US naval blockade was described as remaining in place until a final agreement is completed.
Fars News Agency, citing an Iranian official, said Iran could close the strait again if the blockade continues, according to Reuters. The US calendar had no major data releases, with attention on Fed speeches before the blackout period ahead of the April 28-29 FOMC meeting.
Technically, gold held above the 20-day SMA at $4,646, with RSI (14) near 52 and MACD positive. Resistance sat near $4,931, with support at $4,646 and around $4,361.
Looking back at the events of April 2025, we saw a classic conflict for gold traders as geopolitical de-escalation fought against renewed bets on Federal Reserve rate cuts. The sharp drop in oil prices following hopes of a US-Iran deal put immediate downward pressure on inflation expectations, which is a key dynamic to watch for now. Derivative traders should be prepared for similar rapid shifts in sentiment based on geopolitical headlines.
The sudden revival of Fed rate cut expectations in 2025 was directly tied to that 9% single-day drop in WTI crude. Today, with core inflation having remained stubbornly above 3.5% through the first quarter of 2026, any sign of a significant oil price decline could trigger an even more aggressive repricing of Fed policy. This suggests that call options on gold could offer significant leverage if we see a similar supply-side shock that eases energy prices.
We should remember the Federal Reserve’s hawkish stance throughout late 2025, which contrasts with the dovish sentiment seen in that brief period. The Fed has consistently signaled it needs more than a temporary dip in headline inflation to pivot, meaning a deal in a conflict zone might not be enough this time. Therefore, traders should be wary of chasing the first rumor and instead look for confirmation in Fed speeches or a sustained drop in bond yields.
The fragility of the 2025 ceasefire is a critical lesson, as the market priced in the best-case scenario while the US naval blockade remained active. Today, underlying geopolitical risk remains high, providing a strong fundamental floor for gold prices. We can use this historical example to structure trades, such as buying puts on oil as a hedge for long gold positions when peace talks are announced.
Underlying demand remains a powerful force that was not a factor in the short-term news of 2025. Central banks continued their historic buying spree, adding another 1,047 tonnes to global reserves in 2025, building on the record purchases we saw in 2022 and 2023. This persistent demand from official sources suggests that any significant price dip caused by temporary risk-on sentiment should be viewed as a buying opportunity.
The technical setup from that time, with tightening Bollinger Bands signaling a period of low volatility before a major breakout, is highly relevant today. Given the conflicting fundamental drivers, traders should consider using options strategies that profit from a spike in volatility, such as a long straddle. This allows a position to capitalize on a sharp price move in either direction once the market picks a clear path.
