Gold (XAU/USD) recovered on Monday after a gap-down open, trading near $4,717 after an intraday low around $4,632. Gains were limited as risk-off conditions persisted amid rising tensions between the United States and Iran.
Talks in Islamabad ended without a breakthrough after optimism linked to a two-week ceasefire faded. US President Donald Trump ordered a naval blockade of the Strait of Hormuz, and CENTCOM said it will cover all vessels entering or leaving Iranian ports across the Arabian Gulf and Gulf of Oman from Monday at 10:00 ET (14:00 GMT).
Geopolitical Tensions And Energy Shock
Iran’s Islamic Revolutionary Guard Corps said military vessels nearing the Strait of Hormuz would be treated as a ceasefire breach and could face a response. Crude prices rose, with WTI around $96, up about 6.5% at the time of writing.
Higher oil prices increased inflation concerns and supported expectations of higher-for-longer US rates, supporting the USD and Treasury yields. March headline CPI rose 0.9% month-on-month from 0.3% in February, and 3.3% year-on-year from 2.4%.
Technically, gold is above the 100-day SMA at $4,687.17 and the 200-day SMA near $4,185.69, but below the 50-day SMA at $4,899.38. RSI (14) is near 47 and ADX is around 27; resistance sits at $5,000–$5,200, while support is $4,600–$4,500.
We are seeing a familiar pattern of risk developing in the markets, which brings back memories of the US-Iran escalation in 2025. The naval blockade of the Strait of Hormuz at that time created extreme volatility, a lesson that is now informing our current strategies. With gold currently trading around $4,450, traders are watching for any signs of renewed conflict that could trigger a similar safe-haven rally.
Options Positioning And Volatility Focus
During the 2025 standoff, we saw WTI crude oil spike to $96 a barrel, directly fueling inflation concerns. Today, with WTI back above $85 due to ongoing OPEC+ supply cuts and renewed Mideast tensions, we are seeing a similar effect on prices. The latest US CPI data for March 2026 confirmed this, coming in hot at 3.6% year-over-year, which has dampened expectations for Fed interest rate cuts.
This creates the same difficult environment for gold that we navigated in 2025. While geopolitical risk should support gold as a safe-haven asset, the resulting inflation is pushing US Treasury yields higher as the market reprices Fed expectations. The 10-year Treasury yield has recently climbed back to 4.5%, increasing the opportunity cost of holding non-yielding gold and capping its upside potential.
Given the high level of uncertainty, we believe derivative traders should focus on volatility. Implied volatility on gold options is likely to rise in the coming weeks, making long volatility strategies like straddles or strangles attractive. This allows a trader to profit from a large price move in either direction, without having to bet on whether the geopolitical fear or the high-rate reality will win out.
For those with a more directional bias, we see an opportunity in using options to define risk. Buying call spreads targeting the old resistance zone of $4,800 could be a capital-efficient way to bet on an escalation, while purchasing puts with strike prices below the key $4,200 level, which corresponds to the 200-day moving average from last year, offers a hedge against a renewed sell-off if tensions ease and the focus returns solely to interest rates.
