Gold rose above $4,680 in early European trading on Wednesday, reaching an over one-week high. It extended a rebound from a more than one-month low near $4,500 set on Monday, as the US Dollar weakened.
US President Donald Trump said on Tuesday that “Project Freedom”, aimed at guiding commercial ships out of the Strait of Hormuz, will be paused briefly to allow talks with Iran. He also said on Truth Social that progress has been made towards an agreement with Iranian representatives.
Geopolitical Signals Support Gold
Defence Secretary Pete Hegseth said the US was not seeking to re-escalate tensions and that the ceasefire holds for now. Secretary of State Marco Rubio said the US-led ‘Operation Epic Fury’, launched with Israel on 28 February, is over.
Crude oil fell to a one-week low, which reduced inflation concerns and eased expectations for tighter US monetary policy. CME Group’s FedWatch Tool shows traders pricing in over a 35% chance of a US rate rise by the end of this year.
Traders are watching the US ADP private-sector jobs report, speeches from FOMC members, and Friday’s US Nonfarm Payrolls report.
Technically, gold is above the 200-period SMA at $4,651.69, with RSI near 59 and a rising, positive MACD histogram. Support levels are $4,588.83, $4,495.62, and $4,402.41.
Lessons From The 2025 Rally
Looking back at this time in 2025, we saw gold begin a significant rally from the $4,500 level. This move was driven by optimism around a potential US-Iran peace deal, which weakened the US dollar and lowered oil prices. The market was uncertain, but the technical signs were pointing towards a bullish recovery.
That optimism proved well-founded, as the follow-through buying did materialize in the weeks that followed May 2025. The market’s fear of a Fed rate hike faded, and we saw the central bank pivot toward a more neutral stance later that year, which further fueled gold’s ascent. This historical setup reminds us how quickly geopolitical de-escalation can shift capital towards non-yielding assets like gold.
Today, with gold trading near $4,950, the situation is different yet contains echoes of the past. Recent data shows US inflation, as measured by the CPI, has moderated to 3.1%, but it remains stubbornly above the Fed’s target. This has created uncertainty about the timing of the next rate cut, keeping traders on edge.
Given this context, derivative traders should consider using options to manage risk and capture potential upside. With the CBOE Volatility Index (VIX) currently hovering at a relatively low 14, buying call options on gold ETFs or futures could be a cost-effective way to position for a rally. This strategy allows for participation in further gains while strictly defining the maximum potential loss.
For those anticipating sideways consolidation before the next major move, selling covered calls against an existing gold position could generate income. Alternatively, a calendar spread using gold futures would allow a trader to profit if the price remains stable in the short term but is expected to rise later. This approach benefits from the decay of the front-month option’s value.
The key risk now is a surprise shift in Fed language, which could cause a rapid repricing of rate expectations and a pullback in gold. We remember how the focus was on the NFP report back in 2025; today, the focus is just as intense on every piece of inflation and employment data. Therefore, any long positions via futures should be protected with disciplined stop-loss orders.
