Since the Iran war began, oil prices have been a main factor affecting gold through inflation and interest rate expectations. Gold steadied near USD 4,600 per troy ounce, then fell below USD 4,550 after stronger US data and higher oil.
Over the past seven trading days, gold moved inversely to rising oil prices, as higher inflation risks increased the chance of tighter monetary policy. This raised the opportunity cost of holding gold and put downward pressure on prices.
Gold Reaction To Oil And Rates
After robust US orders and rising oil prices increased rate concerns, gold closed at just over USD 4,500 per troy ounce. This was a one-month low.
World Gold Council data showed China’s first-quarter bar and coin demand was almost 67% higher than a year earlier. It made up just under 45% of global bar and coin demand.
China plans to relax gold import rules from June. A central bank draft proposal would expand “multi-use permits”, extend validity to nine months from six, and remove limits on how many times permits can be used.
More Chinese ports would also be allowed to clear bullion.
China Demand And Trading Approach
We are seeing that the inverse relationship between oil and gold, which became very clear during the Iran war last year, continues to influence the market. With WTI crude holding firm around $95 per barrel, concerns about inflation and a hawkish Federal Reserve are capping gold’s potential. However, the latest US CPI data showing a slight cooling to 3.1% may be giving the Fed reason to pause, creating an opportunity.
The bullish case for gold is anchored by strong physical demand from China, a trend that accelerated after import rules were relaxed back in June 2025. The People’s Bank of China has continued its buying streak, adding another 15 tonnes in April 2026 for its 18th straight month of purchases. This consistent buying provides a strong floor for prices, especially on any dips caused by rate fears.
Given these opposing forces, traders should consider strategies that benefit from price stability or a sudden breakout in the coming weeks. Selling out-of-the-money puts below key support levels, like $4,750, could be a way to collect premium while betting on the strength of Chinese demand. Alternatively, using options to construct a long volatility position could pay off if upcoming economic data forces a sharp move away from the current equilibrium.
