Gold (XAU/USD) fell on Monday even as the US Dollar weakened, with the US-Iran war weighing on price action. It traded near $4,669, down 0.84%, after an intraday high of $4,730.
Axios reported that Iran sent a new proposal to the United States to reopen the Strait of Hormuz and end the war, while leaving nuclear talks for later. US President Donald Trump cancelled a planned Islamabad visit by envoys Jared Kushner and Steve Witkoff, saying Iran had “offered a lot, but not enough.”
Market Focus Shifts To Diplomacy
The US Dollar Index traded near 98.40, down 0.13%, and Washington had not responded to the Axios report. Markets are watching for any move towards renewed talks as Tehran increases diplomatic efforts.
Gold did not gain from the weaker Dollar as rate expectations stayed in focus ahead of meetings of the Fed, ECB, BoE, and BoJ later this week. They are widely expected to keep rates unchanged as Oil price rises have raised inflation concerns and risks to growth.
On the chart, price held above the 200-day SMA at $4,257 but stayed below the 100-day and 50-day SMAs, with RSI near 43 and ADX near 20. Resistance sits near $4,746 then $4,863, while support is $4,650-$4,600, then $4,257.
Looking back at the situation in 2025, we saw gold prices reacting heavily to the US-Iran war and the potential for reopened peace talks. Central banks were holding interest rates high to combat the resulting inflation, which capped gold’s upside despite the geopolitical uncertainty. That period of tension, which held gold around $4,700, has now given way to a new set of economic drivers.
Shift In Macro And Strategy
The de-escalation of the conflict in late 2025 and the full reopening of the Strait of Hormuz caused oil prices to retreat significantly. WTI crude, which spiked to over $150 a barrel during the war, has since stabilized and now trades near $85 as of April 2026. This sharp drop in energy costs has been the primary factor in cooling down global inflation over the last two quarters.
Consequently, the intense inflationary pressures of 2025 have eased, with the latest US Consumer Price Index (CPI) report showing an annual rate of 2.8%, well below the 5% levels seen during the conflict. This has allowed the Federal Reserve and other central banks to pivot from a hawkish to a more dovish stance. Markets are now pricing in at least two interest rate cuts from the Fed before the end of this year.
This shift in monetary policy outlook has pushed gold to new highs, with the metal currently trading around $5,100, while the US Dollar Index has weakened to 91.50. The primary driver for gold is no longer geopolitical fear but the expectation of lower borrowing costs. This fundamental change suggests that strategies should be positioned for further upside in the precious metal.
For the coming weeks, we believe buying call options is a direct way to capitalize on this bullish momentum. Purchasing the June or July $5,250 strike calls offers leveraged exposure if gold continues its ascent on the back of anticipated rate cuts. This strategy limits risk to the premium paid while providing significant upside potential.
Alternatively, selling out-of-the-money put options can generate income while expressing a bullish-to-neutral view. We see selling the June $4,900 strike puts as a viable strategy, as it allows us to collect premium with the expectation that gold will remain above this level. This approach benefits from both time decay and the strong underlying support for gold prices.
While the trend is upward, we should remain mindful of key technical levels for risk management. The 50-day moving average, now near $5,020, serves as a crucial short-term support level. A decisive break below this area might signal a pause in the rally and would be a trigger for us to reassess our bullish derivative positions.
