Gold held a mild upward tone in early European trade on Friday, but gains were limited as the US Dollar strengthened. Markets reacted to news that Donald Trump delayed strikes on Iran’s energy assets and extended the deadline to reopen the Strait of Hormuz to 6 April, then attention shifted as peace-talk messages conflicted. Traders now expect major central banks, including the Federal Reserve, to keep policy tight as higher energy prices add to inflation worries. Markets have removed expectations of further Fed rate cuts and have increased pricing for a rate rise by the end of the year, lifting US Treasury yields and supporting the Dollar, which can weigh on non-yielding gold.

Geopolitical Headlines And Dollar Demand

Headline risk from the US-Iran dispute remained, with Trump saying Iran was seeking a deal while Iranian officials denied talks and rejected the chance of an agreement. Reports of extra US troop deployments also raised speculation about a ground operation, keeping safe-haven demand for the Dollar firm. Technically, gold remains under pressure after breaking below the rising 100-day SMA and failing near it this week. The MACD is negative, RSI is in the low-30s, resistance sits near $4,630 and $4,820, support is around $4,380 then the 200-day SMA near $4,120; $5,000 is in view only after a daily close above $4,820. Central banks often target about 2% inflation, cutting rates below that and raising rates when inflation is well above it. Higher rates tend to support the currency and can reduce gold demand, while the Fed funds rate is an overnight interbank range tracked by CME FedWatch. We are seeing gold struggle to gain any real traction, as the strong US Dollar continues to dominate markets. While geopolitical risks surrounding Iran would typically boost gold, right now they are mainly reinforcing the dollar’s safe-haven status, with the Dollar Index (DXY) hitting a fresh 12-month high of 107.50 earlier this week. This creates a significant headwind for the precious metal.

Rates Inflation And Gold Positioning

The approaching April 6th deadline for the Strait of Hormuz is causing significant tension, keeping energy prices high and fueling inflation concerns. Brent crude futures have remained elevated above $95 a barrel, and this sustained pressure supports the view that global central banks must maintain a hawkish stance. This environment makes it difficult for gold to sustain any rally. Looking back at the sentiment shift in 2025, we see a continuation of the market pricing in higher interest rates for longer. The CME FedWatch tool currently indicates a 75% probability of another 25-basis-point Fed rate hike by June, a stark contrast to the rate cut hopes we saw this time last year. With the 10-year US Treasury yield pushing 4.85%, the opportunity cost of holding non-yielding gold is simply too high for many investors. For derivative traders, this suggests that any bounces in the gold price should be viewed with skepticism. The area around the 100-day moving average, near $4,630, represents a significant resistance level where selling pressure is likely to resume. A strategy of buying put options on any show of strength towards that level could prove effective in the coming weeks. If gold fails to hold support at its recent low of around $4,380, it would reinforce the bearish trend and likely trigger a new wave of selling. A decisive break below this level would open a path toward the next major support zone at the 200-day moving average near $4,120. Given the fundamental backdrop, positioning for further downside seems more prudent than betting on a sustained recovery. Create your live VT Markets account and start trading now.

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