Gold (XAU/USD) stayed under pressure in early European trade, hovering near its daily low and failing again to regain the $4,580 level as renewed US Dollar demand took hold. Geopolitical uncertainty continued to feed safe-haven flows after mixed signals on a possible US-Iran peace deal, while a modest rebound in crude oil revived inflation concerns. That combination has supported a more hawkish Federal Reserve outlook, weighing on the non-yielding metal, with the CME Group’s FedWatch Tool showing markets pricing in at least one US rate hike in 2026.
Media reports citing Central Command said US forces carried out self-defence strikes in southern Iran on Monday, targeting missile launch sites and boats attempting to place mines, as tensions persist over Iran’s nuclear programme and the Strait of Hormuz. Iran has effectively halted nearly all Gulf shipping since the conflict began, restricting roughly 20% of global oil supplies, and the US blockade of Iranian ports has helped crude rebound from a two-week low. Technically, gold remains below the 100-period EMA on the 4-hour chart, with resistance at $4,580 and then $4,593.73; MACD stays positive, while RSI sits near 47, and support is seen around $4,490-$4,485 and $4,450 ahead of Thursday’s US PCE and GDP releases.
Bearish Outlook Supported by Fundamentals and Geopolitics
We believe the current pressure on gold presents a clear opportunity for bearish derivative plays in the coming weeks. The strengthening U.S. Dollar, fueled by both geopolitical tensions and the prospect of Federal Reserve rate hikes, is the primary driver. The U.S. Dollar Index (DXY) has already climbed over 1.5% in the last two weeks, currently trading near 106.20, and we anticipate this trend will continue.
The escalating conflict in the Middle East is directly impacting oil markets, which in turn fuels inflation concerns. With Iran disrupting nearly 20% of global oil supplies, WTI crude has surged back above $95 a barrel, a level not seen since March. Historically, similar energy price shocks have forced the Fed to act aggressively, and we are positioning for this scenario to play out again.
Derivative Strategies for a Potential Gold Downturn
The market is firming up its bets on a more hawkish Fed, which directly undermines non-yielding assets like gold. The CME FedWatch Tool now shows a 65% probability of a 25-basis-point rate hike by the September meeting, up from just 40% a month ago. We are treating this Thursday’s PCE inflation report as a major catalyst that could solidify these expectations and trigger the next leg down in gold prices.
Given the strong technical resistance at the $4,580 level, we are looking at derivative strategies that capitalize on further downside. We are considering buying put options with strike prices near the $4,500 and $4,450 support levels to position for a break lower. Selling call spreads with strikes safely above the $4,600 mark also appears to be an attractive way to collect premium while the bearish fundamental picture remains intact.
