Gold (XAU/USD) started the week in a narrow range near $4,700, with doji candles on the daily chart. The US Dollar Index (DXY) was weaker on Monday amid cautious moves linked to possible steps towards a US-Iran deal.
The Strait of Hormuz remains closed and a second round of peace talks has been cancelled. Risk appetite stayed muted and precious metals were little changed.
Markets Await Fed Decision
Markets are watching central bank decisions, including the Federal Reserve on Wednesday. The Fed is widely expected to keep rates on hold, and Jerome Powell may be replaced by former Governor Kevin Warsh.
Gold is trading inside a broader horizontal channel, with support around $4,600. On the 4-hour chart, RSI is near 45 and MACD is positive but faces resistance.
Price dips have held above about $4,660, while a break below $4,600 could open the way towards the March 26 low near $4,350. Resistance sits between $4,745 and $4,770, with the channel top near $4,885.
Central banks added 1,136 tonnes of gold worth around $70 billion in 2022, the highest annual total on record. Gold often moves opposite to the US Dollar and US Treasuries, and tends to rise when rates fall.
Volatility Strategies In Focus
Given the market’s indecision around the $4,700 level, we see the current tight range as a build-up of energy for a larger move. This week’s Federal Reserve meeting is the likely catalyst, so holding positions that profit from a spike in volatility, such as a long straddle, could be a prudent strategy. This involves buying both a call and a put option with the same strike price and expiration date.
The geopolitical situation with the US-Iran conflict remains a key variable, creating a nervous floor under the price. While optimism about a deal has weakened the US Dollar Index, the recent cancellation of peace talks and continued closure of the Strait of Hormuz suggest this optimism is fragile. A definitive breakdown in negotiations would likely trigger a flight to safety, breaking gold above the stiff resistance near $4,770.
For those leaning bearish, a break below the $4,600 support level would be a critical signal to act. We would consider buying put options or initiating short futures positions, targeting the March 26 low around $4,350. This view is supported by recent US inflation data from March 2026, which showed a stubborn 3.1% reading that may force the Fed to maintain a more hawkish tone than expected.
Conversely, any hint from the Fed of a dovish pivot, or confirmation of Kevin Warsh’s more accommodative stance, would be a major tailwind for gold. A confirmed break above the $4,770 resistance area would be our trigger for long call options, anticipating a move toward the channel top around $4,885. This bullish long-term outlook is reinforced by strong central bank demand, as the World Gold Council reported that another 290 tonnes were added to official reserves in the first quarter of 2026.
We must also remember the significant rally that defined the second half of 2025, which was driven by rate cut expectations. The current sideways market can be viewed as a consolidation period following that major advance. Therefore, the resolution of this current range could set the direction for the next several months.
