Gold fell further on Monday, trading just under $4,550 in the European session. Prices moved below $4,550 in risk-off markets, with support eyed near $4,500.
Rising tensions between the US and Iran, centred on the Strait of Hormuz, supported the US Dollar and weighed on gold. US President Donald Trump said a plan was in place to free vessels blocked in the strait, without giving details.
Technical Signals Remain Bearish
Iran said the waterway would remain closed and warned that any US military move into the area would be treated as a ceasefire violation. Iran said it would respond with “full strength”.
On the 4-hour chart, the Relative Strength Index was near 36 and the MACD was in negative territory. This kept the near-term bias bearish from mid-April highs.
The next support zone was between the April 29 low at $4,510 and late March lows just below $4,500. Below that, targets were the March 26 low near $4,350 and the March 23 low near $4,100.
On the upside, resistance was seen at Friday’s high of $4,660, with mid-April highs below $4,900. Central banks added 1,136 tonnes of gold worth around $70 billion in 2022, the highest yearly purchase on record.
The current downward trend in gold seems to be gaining strength, driven largely by a stronger US Dollar. Escalating tensions in the Strait of Hormuz are causing investors to flock to the dollar as a primary safe haven, putting pressure on gold prices. Recent data supports this, with the Dollar Index (DXY) hitting a three-month high of 106.50 last week following reports of a near-miss incident between US and Iranian naval vessels.
Derivative Strategies For A Lower Gold Price
For derivative traders, this situation suggests looking at bearish strategies in the coming weeks. Buying put options on gold futures or related ETFs could be a direct way to capitalize on the move towards the $4,500 target. We could also consider bear put spreads to limit the initial cost while targeting this specific downside level.
Adding to the bearish case, the most recent Consumer Price Index (CPI) report for April showed inflation cooling slightly to 2.9%, just below forecasts. This eases some of the pressure to hold gold as an inflation hedge, giving sellers more confidence. This is a noticeable shift from the inflation worries that dominated market sentiment throughout much of 2025.
Furthermore, reports from the World Gold Council indicate that central bank buying, while still positive, slowed in the first quarter of 2026 compared to the record pace we saw last year. This slight reduction in demand from the largest buyers removes a key pillar of support for the metal. The People’s Bank of China, for instance, reported its smallest monthly purchase in over 18 months.
The current market dynamic is a clear return to the classic inverse relationship between the dollar and gold. This contrasts with periods in the second half of 2025, when fears of a global recession caused both assets to rally together. With the US economy showing resilience, the dollar is now the preferred safe-haven asset.
Traders should watch the $4,510 level closely, which marks the low from late April. A firm break below this support would likely open the door for a quick test of the psychological $4,500 mark. Any upward bounces will likely meet resistance near last Friday’s high of $4,660, which could present an opportunity to initiate new short positions.
