Gold traded above $4,800 in the European session, near a three-week high, after rebounding from around $4,600. The move came as the US Dollar weakened and the USD Index (DXY) fell to a near one-month low.
US President Donald Trump said planned US strikes on Iran would be suspended for two weeks if Tehran agrees to a complete, immediate, and safe opening of the Strait of Hormuz. Iran said it accepted a two-week ceasefire, with talks due to start on Friday in Islamabad, Pakistan.
Ceasefire Developments And Market Impact
Iran’s Foreign Minister Seyed Abbas Araghchi said safe passage through the waterway would be possible for two weeks, and crude oil prices fell. Lower oil prices eased inflation worries and reduced expectations of a US Federal Reserve rate rise, pushing US Treasury yields down and supporting non-yielding gold.
On charts, gold shows a mildly bullish bias after moving above the middle of its recent range. It remains below the descending 200-period SMA on the 4-hour chart, which aligns with the 61.8% Fibonacci retracement of the March fall.
MACD has moved into positive territory and RSI is in the mid-60s. Resistance sits near $4,920, with targets at $5,000 and $5,141, while support lies at $4,760, $4,605, and $4,411.
The two-week ceasefire between the US and Iran has significantly shifted market sentiment, weakening the dollar and pushing gold above $4,800. This de-escalation presents a clear opportunity for us to re-evaluate gold and currency positions. We’re seeing a classic risk-on move, with the Dollar Index (DXY) dropping below 103.5 for the first time since early March.
Options Strategy And Risk Levels
With crude oil prices falling over 8% in the last 24 hours to below $85 a barrel, inflationary pressures are easing rapidly. The market is now pricing in less than a 15% chance of a Fed rate hike in June, down from over 40% just last week, according to CME FedWatch data. This decline in rate hike expectations is pulling Treasury yields down and further supporting non-yielding assets like gold.
Given the positive momentum, we see an opportunity in buying short-dated call options on gold with a strike price around the psychological $5,000 mark. However, the key is the $4,920 resistance level, where we could see significant selling pressure. A bull call spread could be a prudent strategy to profit from a potential rise while capping the risk if the rally stalls at that confluence point.
The ceasefire news has caused a sharp drop in implied volatility on gold options, with the GVZ index falling by 12% this morning. This makes buying options cheaper, favoring strategies like the bull call spread mentioned earlier. Traders should be prepared for this volatility to spike again if negotiations in Islamabad show any signs of failure over the coming days.
We are reminded of the short-lived de-escalation in the South China Sea back in late 2025, which also caused a temporary spike in gold and a dip in the dollar. In that instance, the rally faded within three weeks when diplomatic talks broke down. This history suggests we should consider taking profits if gold fails to break and hold above the $4,920 level within the next week or two.
For those looking to hedge or speculate on a reversal, the $4,760 support level is the first line of defense. A decisive break below this could signal the end of the rally, making put options with a strike price near $4,600 an attractive position. The fragility of the ceasefire means holding some protective puts could be a wise insurance policy against a sudden return to risk-off sentiment.
