Gold prices are stabilizing below $3,400 as traders look for clarity on possible U.S. actions against Iran. The Federal Reserve has kept interest rates unchanged while updating its targets for 2026 and 2027. Gold is currently supported by the 20-day Exponential Moving Average (EMA). The price of gold is facing resistance below $3,400 due to the new interest rate targets. Inflation risks have increased after the U.S. imposed new tariffs, raising the inflation targets for 2026 and 2027 to 3.6% and 3.4%. Gold typically does well in high-inflation situations, but sustained high interest rates can negatively impact assets that do not yield returns.

Middle East Tensions Increase

Political tensions in the Middle East are pushing gold prices higher. Concerns over Iran’s economy are escalating as the U.S. considers possible military action. A report from Bloomberg indicates that U.S. officials are preparing for action against Iran, with President Trump not ruling out a strike. Gold shows signs of potential movement due to its price pattern. It is currently forming an Ascending Triangle, supported by the 20-day EMA. If gold breaks through resistance, it could rise above $3,500. On the other hand, a drop below $3,245 may lead to further declines. The article highlights three main factors influencing the gold market right now. First, worries about possible military action by the U.S. against Iran are causing caution among investors. Second, the Federal Reserve’s signals regarding long-term inflation expectations and interest rates are significant. Third, traders are closely monitoring gold’s price pattern for signs of either a breakout or a retracement. Each of these factors has important implications for positioning in derivatives markets, especially regarding volatility, directional bias, and timing. From a technical viewpoint, gold is well-supported by its 20-day EMA, which is a common indicator of short-term trend strength. The current Ascending Triangle formation is usually seen as a bullish pattern, although this is not guaranteed. As long as gold stays within this formation and above $3,245, the outlook leans toward an upward trend. However, if it falls below that level, it may signal a shift in direction and could lead to selling pressure.

Revised Inflation Targets

The revised inflation targets released by the Federal Reserve now project 3.6% for 2026 and 3.4% for 2027. Powell’s choice to hold rates steady while suggesting higher long-term inflation expectations indicates that rates might remain elevated longer than anticipated. This situation may not be immediately beneficial for gold, as higher real yields make it less appealing. Nevertheless, geopolitical concerns can sometimes counteract macroeconomic challenges, at least temporarily. Market reactions show that traders have started to account for potential military tensions, but not completely. Bloomberg’s indication that preparations for a possible strike are being made heightens awareness of risk premiums. If diplomatic efforts fail, the uncertainty could lead to sudden movements in gold prices, often driven by news rather than data. These changes can be hard to hedge in real time, making preemptive strategies more effective in the current climate. When price movements narrow under a clear ceiling, like just below $3,400, the potential for a breakout increases. Currently, shorter-term implied volatility does not fully reflect the political risk premium that could arise, creating an opportunity for traders. On the derivatives side, this allows strategies focused on benefiting from upward movements while taking advantage of lower volatility in shorter timeframes. On the downside, it’s important not to overlook the possibility of sharp corrections if expectations of military action diminish or if inflation data comes in softer than expected. If gold prices drop below $3,245, this would change the near-term trend and require a reassessment of bullish positions. Standard protective puts or defined-risk spreads could be helpful here, especially for those holding long physical assets or ETFs. We anticipate volatile sessions in the coming weeks. Macroeconomic signals are mixed, and technical patterns tend to react rather than predict in such times. It’s essential to closely monitor both economic reports and geopolitical developments, while keeping a flexible strategy. In this environment, short-term decisions should be balanced with medium-term caution. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now