Gold fell on Thursday, ending a two-day rise as uncertainty over US-Iran talks continued. XAU/USD traded near $4,444, down about 1.38%, after pulling back from Wednesday’s high near $4,602. Iran rejected a proposed 15-point plan and said any deal would be on its own terms, including security guarantees and recognition of its authority over the Strait of Hormuz. Reports of extra US troop deployments and the end of a five-day pause on planned strikes later this week kept the outlook unclear.

Gold Pullback And Liquidity Stress

Gold was down over 15% from the March peak of $5,419, after dropping more than 20% from that high earlier this week. Traders were reported to be selling Gold for cash, mainly US Dollars, to meet losses or margin calls during volatile markets. Rising Oil prices increased inflation concerns and supported expectations of higher interest rates for longer. Markets now expect the Fed to hold rates through 2026, instead of pricing at least two cuts, pushing US Treasury yields higher. Technically, price was rejected at the 100-day SMA, with the RSI in the low 30s and ATR rising. Resistance sits near $4,622, then $4,964 and $5,000, while support is near $4,306 and the 200-day SMA around $4,112. Central banks added 1,136 tonnes of Gold worth about $70 billion in 2022, the highest yearly purchase on record. Gold often moves inversely to the US Dollar and US Treasuries, and tends to benefit when rates fall. The current market shows that gold is not acting as a typical safe-haven asset, even with significant geopolitical tension between the US and Iran. The demand for cash, specifically US dollars, is the dominant force right now, pushing traders to sell gold to cover other positions. We believe this trend will persist as long as broader market volatility remains high.

Derivatives Positioning And Reversal Risk

This pressure is intensified by the fear of inflation driven by high oil prices, which have now climbed above $110 a barrel, a level reminiscent of the 2022 energy shock. This has fueled market expectations that the Federal Reserve will hold interest rates firm throughout 2026, which in turn strengthens the US dollar. The most recent Consumer Price Index (CPI) data, showing inflation ticking back up to 4.5%, supports this hawkish outlook. For derivative traders, this environment suggests a bearish stance on gold in the near term. We see buying put options with strike prices near the immediate support of $4,306 as a direct way to capitalize on further downside. If that level breaks, the next logical target would be puts aimed at the 200-day moving average around $4,112. Given that volatility is expanding, option premiums are becoming more expensive. This presents an opportunity for selling call credit spreads with strikes safely above the key resistance at the 100-day moving average of $4,622. This strategy allows us to collect premium and profits from gold’s price remaining stagnant or falling further. However, we must be prepared for a sharp reversal if a diplomatic breakthrough occurs. A peace deal would likely send oil prices tumbling, immediately easing inflation fears and weakening the case for prolonged high interest rates. In such a scenario, the primary reason for selling gold would disappear, potentially causing a rapid price squeeze. We recall the massive central bank gold purchases that defined the market in 2025, continuing a trend of strong institutional demand. This underlying buying provides a long-term floor for the price, but it is currently being overshadowed by the market’s acute need for liquidity. This situation is similar to the dash for cash we witnessed in March 2020, where gold briefly sold off with other assets before resuming its climb. Create your live VT Markets account and start trading now.

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