Gold (XAU/USD) fell more than 1% on Wednesday, extending a second weekly decline as conflict risk between the US and Iran lifted oil and supported the US dollar. After exchanges of fire near the Strait of Hormuz, US CENTCOM said it carried out “defensive strikes” against Iranian missile launchers and boats preparing to lay mines, while Iran targeted US bases in Gulf States including Kuwait, the United Arab Emirates and Saudi Arabia. WTI rose by more than 2.50%, and the US Dollar Index (DXY) added 0.32% to 99.53 as markets weighed the prospect of supply disruption and renewed inflation pressure.
US macro data also leaned against expectations of near-term Federal Reserve easing. ADP National Employment rose by 122K in May versus a 117K forecast, while Nonfarm Payrolls are expected to increase by 85K; earlier, the JOLTS report showed job openings rising. ISM Services PMI climbed to 54.5 from 53.6, and Prices Paid increased to 71.3 from 70.7. Technically, gold printed four-day lows around $4,426, near the 200-day SMA at $4,422; a break would expose $4,400, then $4,098. Resistance sits at $4,500, the 20-day SMA at $4,573, the 50-day SMA at $4,626 and the 100-day SMA at $4,794. Central banks added 1,136 tonnes of gold worth about $70 billion in 2022, according to the World Gold Council.
Bearish Outlook for Gold Amid Macro and Geopolitical Headwinds
Given the current environment on June 4, 2026, we see a clear opportunity to position for further weakness in gold prices. The combination of a stronger US dollar, fears of renewed inflation from an oil shock, and a firm Federal Reserve creates a powerful headwind for the precious metal. We believe the path of least resistance for gold is lower in the weeks ahead.
We are watching the escalating US-Iran conflict closely, as it directly impacts energy prices. Historically, geopolitical flare-ups in the Middle East have caused significant oil spikes, and with over 20% of the world’s oil passing through the Strait of Hormuz, any prolonged disruption could send crude prices soaring. This would fuel inflation, reinforcing the Fed’s commitment to keep interest rates elevated.
The strong US labor market and sticky inflation data give the Fed no reason to consider cutting interest rates at its upcoming meeting on June 16-17. With recent core inflation reports hovering stubbornly above the Fed’s target, rate cuts are off the table for the foreseeable future. This high-rate environment increases the opportunity cost of holding non-yielding gold.
US Dollar Strength and Downside Strategies
The US dollar is benefiting from both safe-haven flows and the attractive yield differential over other major currencies. While the Fed holds firm, other central banks are signaling a more dovish stance, making the dollar the preferred asset. We expect the US Dollar Index (DXY) to continue its climb, further pressuring gold, which is priced in dollars.
From a derivatives standpoint, we favor strategies that profit from a decline in gold’s price. We are looking to buy put options with strike prices below the $4,400 level, targeting a move toward the yearly lows near $4,098. This allows for a defined-risk approach to capitalize on the bearish fundamental and technical picture leading into the mid-June Fed meeting.
