Gold fell on Tuesday, trading near $4,700 and down almost 2.50% on the day, alongside a modest rebound in the US Dollar. Renewed tension in the Strait of Hormuz also weighed on market sentiment.
US data added pressure on gold prices. Retail Sales rose 1.7% month-on-month in March versus 1.4% expected, and February was revised at 0.7%; the ADP Employment Change four-week average increased to 54.8K from 39K.
Market Drivers And Geopolitical Signals
Reports about a second round of US-Iran peace talks in Pakistan were mixed. Iran’s state broadcaster said on Telegram that no Iranian delegation had travelled to Islamabad.
A White House official said Vice President JD Vance had not yet left for the talks. A two-week ceasefire is due to expire on Wednesday, and President Donald Trump said it is “highly unlikely” he will extend it, adding the Strait of Hormuz would not be opened until a deal is signed.
The Strait of Hormuz remains under a dual blockade by US naval forces and Iran, supporting higher oil prices and keeping inflation risks in focus. This has reinforced expectations of higher interest rates for longer, which can reduce demand for non-yielding gold.
On the four-hour chart, gold traded below the Bollinger centre line near $4,795.92, with resistance near $4,725, $4,796, and $4,867. The RSI was about 35 and the ADX near 14.
With the US-Iran ceasefire deadline this Wednesday, we must prepare for a significant price swing in gold. The conflicting reports on peace talks create a binary outcome, making directional bets risky. This setup is ideal for strategies that profit from a sharp move in either direction.
Volatility Strategy And Options Positioning
Positioning for a surge in volatility seems to be the most logical play. The Gold VIX (GVZ) has likely jumped over 30% in the past week, a spike reminiscent of the market reaction to the conflict in Ukraine back in 2022, making options pricier but also more potent. A long straddle, buying both a call and a put option with the same strike price and expiry, would allow us to capitalize on a major breakout from the current range.
For now, the path of least resistance appears to be downwards, pressured by a strong dollar and robust US retail sales figures. Looking back at the Commitment of Traders reports from 2025, we saw how quickly managed money can liquidate long positions when geopolitical risk is outweighed by hawkish Fed policy. Therefore, buying put options with a strike near $4,650 could be a prudent way to capture further downside if talks officially collapse.
The ongoing Strait of Hormuz blockade is keeping WTI crude oil prices firmly above $130 a barrel, feeding the narrative that interest rates will remain high to combat inflation. While gold is often seen as a hedge against inflation, the market is currently more focused on the high opportunity cost of holding the non-yielding metal. This pressure is likely to continue until we see a definitive shift in central bank policy.
From a technical perspective, the area around $4,725 is now firm resistance, and a sustained break below this week’s lows could trigger a swift move lower. We should be watching for any failure of the Relative Strength Index to confirm new price lows, which might signal a bullish divergence. In the event of a surprise peace agreement, a sharp relief rally is possible, making cheap, out-of-the-money call options an effective way to hedge against that tail risk.
