Gold (XAU/USD) held steady on Wednesday after falling over 2% on Tuesday. It traded at $4,726 after a daily high of $4,772, as lower US Treasury yields offered support and the Middle East outlook stayed uncertain.
US-Iran talks remain halted after a US blockade of Iran-flagged vessels. The IRGC seized three cargo ships in the Strait of Hormuz and called for the blockade to be lifted, while Donald Trump extended the ceasefire and awaited Tehran’s proposal.
The US 10-year Treasury yield was 4.298% after earlier declines, which trimmed gold’s rebound. Higher oil prices were linked to inflation pressures, adding to expectations that US rates stay higher for longer.
Money markets price no Fed rate change in 2026, with the first cut expected in July 2027, according to Prime Terminal. US Retail Sales showed continued spending, mainly tied to higher petrol prices, and Atlanta Fed GDPNow projects 1.2% growth in Q1 2026.
Fed Chair nominee Kevin Warsh told the Senate he does not support forward guidance and backs central bank independence. The US Dollar Index rose 0.17% to 98.57, a seven-day high, ahead of Thursday’s jobless claims and S&P Global Flash PMIs for April.
Gold failed to clear $4,800 and slipped below $4,750, with focus on the 100-day SMA at $4,718. Further levels cited include the 20-day SMA at $4,692, support at $4,600, and resistance at the 50-day SMA of $4,883 after a monthly high of $4,890.
Central banks added 1,136 tonnes of gold worth around $70 billion in 2022, according to the World Gold Council.
We see gold is under pressure as the market now believes the Federal Reserve will hold interest rates steady for a long time. The strengthening US dollar is creating significant headwinds, capping any potential gains for the metal. This environment suggests that any rallies in gold might be short-lived and represent selling opportunities.
The market has fully absorbed this hawkish stance, with the CME FedWatch Tool now indicating a less than 10% probability of a rate cut at any point in 2026. This reinforces the idea that the cost of holding a non-yielding asset like gold will remain high. We are closely watching Thursday’s jobless claims and PMI data for any signs of economic weakness that could alter this outlook.
Given the neutral-to-bearish sentiment, buying put options with strike prices below the $4,700 level appears to be a prudent strategy. These positions would profit if gold breaks below its key moving averages, especially the 20-day SMA at $4,692. We see this as a way to capitalize on the current downward momentum.
However, we must remain aware of the geopolitical risks in the Middle East, which are providing a floor for gold prices. Any significant escalation involving the US and Iran in the Strait of Hormuz could cause a rapid price spike, invalidating bearish positions. Therefore, using long-dated, out-of-the-money call options could serve as an effective hedge against a sudden reversal.
The resistance at $4,800 seems very strong, especially with the dollar index holding firm at a seven-day high. For traders who believe the upside is capped, selling call spreads with a short strike at or above this level could generate income. This strategy benefits from both a drop in price and sideways consolidation as time premium decays.
