Gold rose in Asian trading on Tuesday, extending its advance after the US and Iran agreed a framework aimed at ending hostilities, which eased inflation worries. A memorandum of understanding was reported as signed electronically, and the Strait of Hormuz was described as partially open with plans for full reopening on Friday. Market pricing also reflected reduced expectations for tighter US policy: the implied probability of a Federal Reserve rate rise in December fell to 58% from nearly 70% last week, as measured by the CME FedWatch tool.
Uncertainty persisted as the sides differed on operational details, including whether “fees” would be levied in the waterway, and US officials warned of renewed military action if a final nuclear accord is not reached. The Fed is scheduled to decide policy on Wednesday, with economists forecasting the benchmark rate will remain within 3.50% to 3.75%. Technically, XAU/USD stayed below the Bollinger midline and the 100-day SMA, with the RSI near 43; resistance levels were cited at $4,363, $4,415, $4,685 and $4,762, while support was placed around $4,145.
Impact of the US-Iran Deal on Gold and Inflation Expectations
The recent US-Iran framework deal is causing gold to rally as it eases inflation concerns by lowering oil prices and the dollar. We see this as the market pricing out the geopolitical risk premium that has been building for months. This shift is providing a tailwind for gold, which benefits when Treasury yields fall.
However, we must remain cautious as the deal is fragile, with both sides offering different versions of key terms. President Trump’s threat to restart military attacks if a final accord is not reached introduces significant headline risk. Historically, such preliminary agreements can unravel quickly, which would cause a rapid reversal in the current market sentiment.
The easing tensions have directly impacted Fed policy expectations, with the probability of a December rate hike dropping from 70% to 58%. A full reopening of the Strait of Hormuz, which handles about 20% of the world’s oil supply, would be a major deflationary force, giving the central bank reason to stay on hold tomorrow. This environment is fundamentally supportive for gold prices in the near term.
Trading Implications and Strategies Amid Technical Uncertainty
Despite the bullish news, the technical picture remains bearish, with price below the key 100-day simple moving average. This creates a conflict that is ideal for options traders, as implied volatility is likely to be elevated. We believe selling out-of-the-money put spreads below support at $4,145 could be a way to collect premium while defining risk.
For traders who think this rally has momentum, a bullish call spread could be an effective strategy to target a move toward resistance near $4,415. This allows for participation in further upside while capping potential losses if the political situation deteriorates. The defined risk nature of spreads is prudent until a clearer trend emerges.
Conversely, if the price fails to overcome initial resistance at the June 9 high of $4,363, it could signal that the bearish trend is reasserting itself. In that scenario, we would view this rally as a selling opportunity. Buying puts or initiating bear put spreads would be a logical response to play for a retest of the lower Bollinger band.
