TD Securities strategists say higher energy-linked inflation and delayed Federal Reserve rate cuts are keeping the opportunity cost of holding gold high in the near term. They add that a lack of Middle East capital in the gold market is a downside catalyst.
They state that, even with a ceasefire, it may take time to reverse higher inflation expectations. They link this to higher energy, fertiliser, and chemical prices, which they say could make early Fed cuts difficult.
Later 2026 Gold Outlook
They expect conditions to ease later as energy and interest rates normalise and the US Dollar weakens. On that basis, they forecast gold returning above $5,000 in the latter part of 2026.
The opportunity cost of holding gold remains high, as elevated interest rates offer better yields elsewhere. With the latest March CPI report showing inflation at a stubborn 3.8%, we see the Federal Reserve’s hands as tied for the immediate future. This makes non-yielding assets like gold less attractive in the coming weeks.
A strong U.S. dollar, with the DXY index hovering near 106, is creating significant resistance for gold prices. Compounding this, WTI crude has held firm above $90 a barrel, keeping inflation expectations high and delaying any potential monetary policy pivot. This environment supports strategies that are neutral to bearish on gold through the second quarter.
For the near term, derivative traders could consider selling out-of-the-money calls with expirations in May and June 2026. This strategy collects premium by taking advantage of the expected range-bound price action caused by high carry costs. It allows for profiting from time decay as long as gold does not break out significantly to the upside.
Options Positioning For Late 2026
We are simultaneously looking at the latter half of 2026 for a major shift as energy costs and rates are expected to normalize. To position for the potential move toward $5,000, acquiring long-dated call options, such as those expiring in December 2026 or March 2027, is a viable strategy. These instruments provide exposure to the significant upside while capping the initial risk.
A more complex approach involves using a calendar spread to capitalize on this timeline. By selling a near-term call option, a trader can fund the purchase of a longer-dated call option at a similar strike price. This position benefits from the expected sideways movement in the coming weeks while maintaining exposure to the anticipated rally late in the year.
