Gold rose nearly 1% on Tuesday, trading near $4,560 after rebounding from one-month lows of $4,500. A fragile US–Iran ceasefire helped risk appetite, while US Treasury yields fell.
The US and Iran clashed on Monday as the US Navy escorted commercial ships through the Strait of Hormuz under “Operation Freedom”. The US military destroyed six Iranian boats, and Iran attacked UAE oil facilities, pushing oil prices higher.
Market Drivers And Rates
The US Dollar Index (DXY) was down 0.04% at 98.45. The 10-year US Treasury yield fell 1.5 basis points to 4.416%, which supported bullion, and markets expect the Fed to keep rates unchanged through 2026.
US data showed slower activity in April, with ISM Services PMI dipping to 53.6 from 54. The employment component rose from 45.2 to 48, while prices paid held at 70.7, near four-year highs last seen in April 2022.
March imports rose 3.6% and exports increased 3.1%, widening the trade deficit. JOLTS openings eased to 6.866 million from 6.922 million, versus a 6.83 million forecast.
Gold remains range-bound between $4,700 and $4,500, with key levels at $4,600, $4,660, $4,703, $4,750-$4,755, $4,351, and $4,269.
Trading Strategy And Positioning
The fragile ceasefire in the Middle East provides a temporary calm, but the underlying tension is a strong support for gold. We’ve seen shipping insurance premiums for tankers in the Strait of Hormuz jump 40% in the last two weeks, a clear sign that the market sees significant risk remaining. This uncertainty should keep a floor under the gold price near the $4,500 level.
The Federal Reserve is in a difficult position, which is beneficial for us as gold traders. Last month’s CPI data showed core inflation stubbornly holding at 3.8%, making it hard for the Fed to cut rates even as economic activity slows. This dynamic of sticky inflation and a hesitant Fed keeps real yields low, increasing the appeal of holding non-yielding gold.
With gold trading in a tight range between $4,500 and $4,700, and a major catalyst like Friday’s Nonfarm Payrolls report approaching, implied volatility is relatively cheap. We should consider strategies like buying straddles or strangles that will profit from a large price move in either direction. The consensus forecast is for a weak jobs number around 155,000, which would likely break the range to the upside.
If the jobs data confirms a slowing economy, we should be prepared for a rapid move higher. We can position for this by buying call options with strike prices just above $4,600, targeting a test of the May 1 high near $4,660. A surprisingly weak report could even propel prices toward the 20-day moving average above $4,700.
On the other hand, we must be hedged for a stronger-than-expected jobs report. A strong number would reignite fears of Fed hawkishness and send the dollar higher, pushing gold down. In this scenario, put options with a strike below $4,500 would be profitable, targeting the March low around $4,351.
This current price action feels very similar to the consolidation we saw in the second half of 2025. Back then, markets were also caught between slowing growth and persistent inflation for a full quarter. The eventual break of that range led to a significant, fast-moving trend.
