Gold traded lower in the Asian session on Monday but held above $4,600. Hawkish signals from major central banks, including the US Federal Reserve, followed concerns that Middle East energy shocks could lift inflation and reduce demand for non-yielding gold.
US President Donald Trump proposed “Project Freedom” to guide ships through the Strait of Hormuz and warned of force if disrupted. Iranian lawmaker Ebrahim Azizi said US interference would breach the ceasefire, while Iran’s IRGC accused the US of not honouring agreements and warned renewed hostilities are likely.
Fed Policy And Inflation Outlook
US data last Thursday showed inflation accelerated in March, supporting expectations that the Fed may keep rates unchanged well into next year. The Fed held rates at 3.50%–3.75%, with three dissents, the highest since 1992, and Neel Kashkari said a prolonged Iran conflict could raise inflation risks and may require higher rates.
A firmer US dollar added pressure to gold, while traders awaited US data including Friday’s Nonfarm Payrolls. Technically, the 1-hour MACD is below zero, RSI is 49.60, and a break below $4,600 could target $4,512.28; resistance sits at $4,650.47, $4,655.61, $4,699.88, $4,744.15, $4,807.19, and $4,887.48.
With the US Federal Reserve holding rates firm at 3.50-3.75%, the opportunity cost of holding non-yielding gold remains high. The latest CPI data for April 2026 showed inflation unexpectedly ticking up to 4.1%, reinforcing the central bank’s hawkish stance. We see this as the primary driver for a weaker gold price in the near term.
The escalating geopolitical risk in the Strait of Hormuz is what’s preventing a steeper decline in gold prices. This uncertainty is reflected in the options market, where the CBOE Gold Volatility Index (GVZ) has climbed over 15% in the last two weeks to 22.5. We believe traders should use options to define their risk, as any sudden military event could cause a sharp, unpredictable price spike.
Upcoming Data And Tactical Levels
This Friday’s US Nonfarm Payrolls report is the next major catalyst. After last month’s strong reading of 280,000 jobs, another solid number above the 210,000 consensus would likely strengthen the US Dollar and push gold decisively below its support. A weak report, however, could provide a short-term bounce for the metal.
From a tactical standpoint, we are watching the $4,600 level as a key trigger point. A sustained break below this level could open the door for a move towards the $4,512 structural low. We think buying put options with a strike price near $4,550 is a prudent way to position for this potential breakdown while capping potential losses.
We are reminded of the sharp gold rally in the second half of 2025, which was fueled by recession fears that ultimately subsided. That move reversed quickly once the Fed made its commitment to fighting inflation clear. The current environment feels very similar, suggesting the Fed’s policy will likely outweigh the geopolitical safe-haven bid over the coming weeks.
