Gold traded just under $4,700 in early European hours on Wednesday and stayed under pressure for a second day, but selling remained limited. A stronger US Dollar, linked to higher inflation data and ongoing geopolitical tension, weighed on the non-yielding metal.
US CPI rose from 3.3% to 3.8% year on year through April, a near three-year high, while core CPI increased 0.4% in April and held at 2.8% year on year, a seven-month high. Markets priced about a 35% chance of a US rate rise by year-end, adding to the headwind for gold.
US Treasury yields moved higher, with the 30-year yield briefly reaching 5.0% and the two-year yield staying near 4%. Oil prices remained elevated amid a US-Iran stalemate, while tensions also centred on Iran’s nuclear programme and the Strait of Hormuz.
Traders showed caution ahead of a two-day Trump–Xi meeting, as well as US PPI data and fresh geopolitical updates. On charts, a bearish double-top formed near $4,765–$4,770, with support around the 200-hour SMA near $4,655.51; MACD stayed slightly positive and RSI sat just below 50.
Looking back to this time last year, in May 2025, the mood was quite different as hotter-than-expected inflation at 3.8% had markets bracing for a more aggressive Federal Reserve. We saw the strong dollar pushing gold down below the $4,700 mark as a result. The entire focus was on the prospect of further rate hikes to combat rising consumer prices.
Today, the situation has evolved significantly, with the latest Consumer Price Index (CPI) report showing inflation has cooled to 2.9% year-over-year. This is a marked improvement from the 3.8% we saw last year and moves us much closer to the Fed’s target. This change fundamentally alters the landscape for non-yielding assets like gold.
Consequently, market expectations for the Fed have completely flipped from the hawkish stance of 2025. Instead of pricing in rate hikes, fed funds futures now indicate a roughly 70% probability of at least one rate cut by the September 2026 meeting. This potential for lower borrowing costs makes holding gold more attractive.
This shift is reflected in U.S. Treasury yields, which are no longer the primary headwind for gold they were a year ago. The benchmark 10-year Treasury note yield has fallen to around 4.1%, a considerable drop from the levels that pushed the 30-year towards 5% in 2025. A lower yield environment tends to weigh on the dollar, providing further support for gold prices.
Geopolitical risks are also benefiting gold more directly now than they did last year. While the US-Iran stalemate in 2025 strengthened the dollar as the primary safe haven, current trade tensions are seeing capital flow into gold. This restores its traditional role as a hedge against global uncertainty.
For derivative traders, this environment suggests a shift from the cautious or bearish positioning of 2025. With these macroeconomic tailwinds building, buying out-of-the-money call options for the third quarter could offer leveraged upside with defined risk. Implied volatility remains moderate, making premiums on these options relatively affordable for now.
Looking at the current charts, gold has broken well past the $4,770 resistance that capped the market last year and is now consolidating around $4,950. A key level to watch for is a sustained break above the psychological $5,000 mark. Options traders could use this level as a strike price for building bullish positions, anticipating the next leg up.
