Gold (XAU/USD) rose on Tuesday as the US Dollar weakened amid renewed hopes of US-Iran talks. XAU/USD traded near $4,795, up 1.11%, but stayed within a two-week range.
Donald Trump said Iran had contacted the US and wanted to make a deal. This followed a US naval blockade targeting Iranian ports after weekend talks failed to reach a breakthrough.
Reports said a second negotiation round could take place in Islamabad later this week before a two-week ceasefire expires. Axios reported Pakistan, Turkey, and Egypt are involved in mediation efforts.
Disagreements over Iran’s nuclear programme continued, keeping uncertainty high. The US Dollar Index (DXY) fell to six-week lows.
Crude Oil edged down from recent highs, easing near-term inflation concerns, but disruptions in the Strait of Hormuz still constrained supply. Chicago Fed President Austan Goolsbee said inflation expectations were broadly anchored, but rate cuts in 2026 could become less likely without clearer cooling in inflation.
US March Producer Price Index data was softer than expected: headline PPI rose 0.5% MoM versus 1.2%, and was unchanged from the prior 0.5% (revised from 0.7%). Annual PPI was 4.0% versus 4.6%, up from 3.4%.
Technically, gold stayed below the 50-day SMA at $4,902 and above the 100-day SMA at $4,694. RSI was 50 and ADX was near 27, with resistance at $4,902 and support at $4,694.
Given the current deadlock, we should consider strategies that benefit from gold trading within a defined range. With gold caught between its 50-day moving average at $4,902 and its 100-day at $4,694, selling options premium through an iron condor could be a viable approach. This strategy allows us to profit as long as gold’s price remains stable and does not break out in either direction in the near term.
The upcoming expiration of the two-week US-Iran ceasefire is a significant catalyst that could shatter the current calm. We should prepare for a spike in volatility by looking at long strangles, buying both a call and a put option to capitalize on a sharp price move regardless of the direction. The Cboe Gold Volatility Index (GVZ), currently hovering around a tense 19, suggests the market is already pricing in a potential breakout from this consolidation.
Geopolitical developments will be the primary driver, and we have seen this pattern before. Looking back at the market reactions during the 2015 nuclear deal negotiations, a diplomatic success could weaken the US Dollar and push gold toward the $5,000 mark. Conversely, a failure in talks could trigger a flight to the safety of the dollar, potentially sending gold down to test support below $4,600.
The softer March Producer Price Index, which came in at 4.0% annually, has not been enough to convince us that the Federal Reserve will rush to cut rates. We remember the aggressive rate-hiking cycle of 2022-2023, and with core inflation still double the Fed’s 2% target, policymakers will likely remain cautious. This Fed hesitancy is putting a cap on gold’s potential rally for now, keeping it within its current range.
