Gold rose on Friday after a flat session, trading near $5,030. It had dropped to about $4,842 on Tuesday, its lowest level in nearly two weeks.
Tensions between the US and Iran increased after Donald Trump said he expects clarity on a nuclear deal within 10 to 15 days. Iran and Russia also held joint naval drills in the Gulf of Oman. Iran told the UN it would respond “decisively” to any US military action.
Inflation Data Supports Gold Demand
US data showed stronger inflation, which can boost demand for gold as a hedge. Core PCE rose 0.4% month-on-month in December, up from 0.2% and above the 0.3% forecast. The annual rate rose to 3.0% from 2.8%.
GDP growth slowed in the fourth quarter of 2025. The economy grew at an annualised 1.4%, down from 4.4% in Q3 and below the 3.0% estimate.
The University of Michigan Consumer Sentiment Index came in at 56.6 in February, down from 57.3. The Expectations Index held at 56.6. One-year inflation expectations eased to 3.4% from 3.5%, and the five-year measure slipped to 3.3% from 3.4%.
With gold holding above $5,000, fear is driving the market. Rising US-Iran tensions and stubborn late-2025 inflation data are boosting demand for safe-haven assets. This is a key bullish signal in the near term.
Options Strategy For Geopolitical Catalyst
The 10 to 15-day timeline for the Iran nuclear deal is a major catalyst. A key approach is to buy short-dated call options to capture any sharp upside move. A similar setup appeared in early 2022, when gold rose more than 10% in the weeks before the Ukraine conflict as markets priced in geopolitical risk.
The weak Q4 2025 GDP result of 1.4% also puts the Federal Reserve in a tough spot. Even with high inflation, slower growth makes further rate hikes harder. That tends to support gold, which does not pay interest. This backdrop resembles stagflation, which has often been positive for precious metals.
This shift is showing up in the options market. The CBOE Gold Volatility Index (GVZ) recently hit a 52-week high of 24.5. Open interest in out-of-the-money call options has also surged, especially the $5,200 strike for the March 2026 expiration. It has more than doubled in the past week. This suggests traders are positioning for a meaningful upside breakout.
The main risk to this view is a sudden diplomatic breakthrough between the US and Iran. Because of that, using derivatives such as bull call spreads can help lower the upfront premium and cap downside risk. This keeps upside exposure while offering protection if tensions ease and gold reverses.
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