Gold (XAU/USD) rose on Tuesday to about $4,580 after a five-week low near $4,500 on Monday. Gains remained limited as expectations for higher interest rates persisted, linked to Middle East tensions and energy-driven inflation concerns.
Reports on Monday described new attacks in the Gulf region, with the US-Iran truce under strain around the Strait of Hormuz. Iran was reported to have targeted oil infrastructure in the UAE, and US President Donald Trump said US forces shot down seven small Iranian boats near the Strait.
Rates And Inflation Outlook
Higher energy risks added to inflation concerns, while inflation remains above the Federal Reserve’s 2% target. Higher interest rates reduced support for gold, which does not pay interest.
Markets shifted towards later rate cuts and a higher chance of hikes. The CME FedWatch Tool showed the probability of a rate hike at the December meeting rising to about 27%, from near zero a week earlier.
US JOLTS Job Openings fell to 6.866 million in March from 6.922 million in February, versus 6.83 million expected. ISM Services PMI eased to 53.6 in April from 54.0, just below 53.7 expected.
On charts, XAU/USD stayed below the 100-day and 50-day SMAs but above the 200-day SMA. Support sits near $4,500 and the 200-day SMA near $4,293, while resistance is at $4,766, $4,808, and $5,000.
Trade Setup And Key Levels
With the Federal Reserve signaling a hawkish stance, we see the immediate pressure on gold as being to the downside. The most straightforward response is to consider buying put options with strike prices below the $4,500 support level. This allows us to position for a further decline driven by higher interest rate expectations while clearly defining our maximum risk.
However, the renewed conflict in the Strait of Hormuz means the potential for a sudden price spike is significant, making an outright short position dangerous. We have seen the Gold Volatility Index (GVZ) jump over 15% in the last week, reflecting this heightened uncertainty. This environment is ideal for long strangles, where we would buy both an out-of-the-money call and an out-of-the-money put to profit from a large price move in either direction.
This situation feels very similar to what we experienced back in 2023, when stubborn inflation kept the Fed on a hawkish path and limited gold’s appeal. With the latest Core PCE inflation data showing a 3.1% annual increase, well above the 2% target, the market’s fear of a firm Fed is justified. This underlying data supports a view that any rallies in gold will likely be sold into.
The Nonfarm Payrolls report due this Friday is now a critical event that will shape our strategy for the coming weeks. After job growth consistently beat expectations for the last quarter of 2025, another strong report would almost certainly send Treasury yields higher and weigh heavily on gold prices. We are prepared to increase our bearish exposure if the jobs number comes in hot.
Given the elevated volatility, selling options premium is another attractive strategy for us. We are looking to establish bear call spreads, selling calls with a strike price near the 50-day moving average around $4,800. This position will generate income if gold trades sideways or drifts lower, while the purchased calls further out provide protection against a sudden geopolitical flare-up.
