Gold (XAU/USD) started the week weaker, trading near one-month lows. It was around $4,520 in the US session, down nearly 2.0% on the day.
Market conditions remained tense due to uncertainty over US-Iran talks and events around the Strait of Hormuz. A fire was reported at a petroleum industrial site in Fujairah, UAE, after a drone attack said to be launched from Iran.
Geopolitical Tensions And Shipping Risks
Iran’s Fars news agency said two missiles hit a US naval vessel near Jask after it ignored IRGC warnings to stop. A US official denied any American vessel was hit, according to Axios.
US President Donald Trump announced “Project Freedom” to escort commercial ships through the Strait of Hormuz. Tehran warned it would attack US forces if they tried to approach or enter the waterway.
Oil prices stayed elevated due to supply disruption risks, raising inflation concerns. This supported higher US Treasury yields and kept pressure on non-yielding gold.
CME FedWatch showed expectations for the Fed to hold rates through this year, with markets pricing in hikes next year. The probability of a January 2027 rate rise moved to 22% from near 0% a week earlier.
Technical Levels And Trading Focus
On the 4-hour chart, price stayed below the 20-period SMA near $4,590.71 and just under the lower band around $4,519.06. RSI (14) was near 33, with resistance at $4,519.06, $4,590.71, $4,662.35 and $4,850.00, and support near $4,400.
As of today, May 4, 2026, we see gold under significant pressure from a hawkish Federal Reserve. With the 10-year Treasury yield now pushing 5.5%, the appeal of holding a non-yielding asset like gold is diminishing rapidly. This follows last month’s surprisingly strong Nonfarm Payrolls report, which showed the US economy adding 315,000 jobs in April 2026 and reinforced the Fed’s tough stance.
For the coming weeks, we should consider buying put options to capitalize on this downward momentum, especially with key US jobs data on the horizon this Friday. Another strong report would likely solidify bets on a 2027 rate hike and could push gold toward its key support level at $4,400. The current bearish trend appears to have room to run before it becomes technically oversold.
However, we must also account for the extreme geopolitical risk from the Strait of Hormuz. With Brent crude now trading above $120 per barrel due to supply fears, any direct military escalation between the US and Iran would trigger a flight to safety. This situation is reminiscent of the regional tensions in 2019 and 2020, which created a solid floor under gold prices.
Given this explosive potential, holding some out-of-the-money call options as a hedge against a sudden spike is a prudent strategy. The market is caught between these two powerful forces, making volatility plays like straddles attractive. This allows us to profit from a large price swing in either direction, which seems likely given the fundamental conflict between Fed policy and Middle East instability.
The upcoming US ISM Services PMI and JOLTS data this week will provide the next major clues. Weak economic data could slightly ease the hawkish Fed pressure and give gold some breathing room. Conversely, strong data will confirm the market’s bearish bias and likely accelerate the move down towards that $4,400 support zone.
