Gold has bounced back after a sharp decline, rising over 5% as buyers returned. Even though a stronger US Dollar and improved US-Iran relations might limit its gains, Gold remains supported above the rising 20-day SMA with widening Bollinger Bands. Gold is currently priced around $4,980, recovering from a drop to $4,402, which was mainly due to position unwinding and margin liquidations. Despite the recent fluctuations, Silver also increased by nearly 10%.

US-Iran Relations Developments

The US and Iran are showing signs of reduced tensions, planning to send envoys for nuclear discussions. At the same time, a trade deal with India has led to significant reductions in US tariffs on Indian goods. US economic data releases are on hold due to a government shutdown, yet the US Dollar Index is climbing, boosted by positive manufacturing data and the nomination of a new Fed Chair. Markets view Kevin Warsh’s nomination as a sign that aggressive rate cuts may not happen. From a technical viewpoint, Gold’s uptrend is strong, staying above $4,800, with a recovering RSI and a high ADX showing a solid, although slightly easing, positive trend. Resistance is at $5,000, while support is around $4,500 if prices decrease. The quick recovery from the $4,400 level indicates strong buying interest, but we need to be cautious in the coming weeks. The rising volatility, with the Average True Range hitting 212, means options premiums are high. This cost needs to be considered when taking new positions to capture short-term moves.

Central Banks Continue Support

The overall uptrend remains our primary guide, bolstered by significant central bank purchases expected to continue through 2025. Last year, central banks added over 1,000 tonnes to their reserves, providing a strong long-term price floor. Selling out-of-the-money put spreads with a strike price below the recent low of $4,402 could allow us to collect high premiums while betting the major correction is finished. However, we cannot overlook the US Dollar’s increase to 97.40, especially with Kevin Warsh, seen as a hawkish nominee for Fed Chair. This comes alongside the latest CPI data for January 2026, which shows core inflation staying above 3%, supporting the idea of “higher for longer” interest rates we’ve heard all through 2025. A stronger dollar makes gold costlier for foreign buyers, creating a headwind. This environment could benefit traders who think the rally will slow down before hitting new highs. Given the strong resistance near the old peak of $5,600, creating bear call spreads above the $5,400 level could be a strategy that limits our risk. This approach profits if gold moves sideways or drifts lower in the weeks ahead. It’s important to note that even with price recovery, gold-backed ETFs saw net outflows of over $2 billion in January 2026, indicating institutional investors are not fully convinced yet. With the jobs report delayed and US-Iran talks pending, the market looks for a new catalyst. We need to stay flexible as the strong technical trend and the challenging macroeconomic backdrop send mixed signals. Create your live VT Markets account and start trading now.

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