Gold (XAU/USD) traded in a choppy range on Tuesday, near $4,658, as markets awaited developments ahead of a US deadline for Iran. Trading lacked clear direction as participants watched for truce or deal headlines.
Donald Trump set an 8:00 p.m. Eastern Time (00:00 GMT Wednesday) deadline for Iran to “make a deal or open up the Strait of Hormuz”. He also threatened strikes on Iran’s energy and civilian infrastructure if no agreement is reached.
Iran Deadline And Strait Of Hormuz Focus
IRNA reported Tehran rejected a ceasefire proposal via Pakistan and instead offered a 10-point plan. The plan includes a permanent end to the war, lifting sanctions, and a framework for safe passage through the Strait of Hormuz.
Gold has not seen sustained safe-haven demand, while the US Dollar stayed firm. Higher oil prices increased inflation concerns and supported expectations of higher-for-longer interest rates.
March US CPI is due later this week, with forecasts of 0.9% MoM versus 0.3% in February, and 3.3% YoY versus 2.4%. Markets have largely removed expectations for rate cuts this year.
Bloomberg reported China added about 160,000 troy ounces (about 5 tons) in March, the 17th straight month of buying. The WGC estimated global central banks bought a net 25 tons in the first two months.
Technical Setup And Options Strategy
On the 4-hour chart, XAU/USD formed a bearish flag, with the 100-period SMA near $4,654 and the 200-period SMA near $4,908. Support levels included the 50-period SMA around $4,585, then $4,400 and $4,100, while RSI hovered near 50 and MACD stayed slightly negative.
Given the choppy price action we saw in 2025 around the Iran ultimatum, the current environment calls for a focus on volatility. We see gold caught between renewed geopolitical risk premiums and the hard reality of a hawkish Federal Reserve. Derivative traders should consider strategies that profit from large price swings, as the market remains undecided on its next major move.
With implied volatility on XAU/USD options ticking up, purchasing straddles or strangles could be an effective strategy in the coming weeks. This allows a trader to profit from a significant breakout in either direction without having to predict the outcome of current Middle East negotiations. Recent CFTC data shows a notable increase in open interest for both out-of-the-money calls and puts, suggesting larger players are also positioning for a decisive move.
If we look back at the bearish flag pattern that formed in 2025, a similar setup could emerge if current tensions de-escalate. The powerful headwinds from a strong U.S. dollar and high interest rates have not gone away. A break below the current support near $4,585 would open the door for traders to buy put options, targeting the $4,400 level which acted as a key psychological zone last year.
The inflationary pressures mentioned in last year’s analysis remain a central theme for us. The latest Consumer Price Index (CPI) report for March 2026 showed headline inflation at a sticky 3.1%, reinforcing the view that the Fed will not cut rates before the fourth quarter. This keeps the opportunity cost of holding non-yielding gold very high, capping any significant rallies that aren’t driven by immediate safe-haven demand.
However, the long-term support from central bank buying is a factor that we cannot ignore. The World Gold Council’s final 2025 figures confirmed that central banks added a net 850 tonnes to their reserves, marking the second-highest year on record after the 2022 surge. This persistent demand provides a floor under the market, meaning any sharp sell-offs are likely to be viewed by institutional players as buying opportunities.
For the near term, we believe the best approach is to use options to define risk and capitalize on the market’s indecision. A trader could purchase puts to hedge against a drop toward the $4,400 support level while simultaneously holding a smaller position in longer-dated call options. This hedges against a potential macro-driven decline while retaining exposure to a sudden geopolitical flare-up, which historically has sent gold soaring.
