Gold (XAU/USD) opened more than 1% lower near $4,445 on Monday. WTI oil rose almost 3% to above $102.50, adding to higher inflation expectations. Higher inflation expectations can lead central banks to keep rates steady for longer or tighten policy. That tends to reduce demand for non-yielding assets such as gold.

Middle East Risk And Market Focus

Market attention is on the Middle East after reports that the US is considering a ground invasion of Iran. The Wall Street Journal reported the Pentagon will send 10,000 additional troops to Iran. Reuters reported that US President Donald Trump told the Financial Times that a deal with Iran could come soon. He said indirect talks via emissaries were progressing well and a deal could be made fairly quickly. Technically, gold remains under pressure around $4,445, below the 20-day EMA near $4,735. The RSI is in the 20.00–40.00 range, and price has trended lower from the $5,300 area after breaking below $4,900. Resistance sits at $4,736 and $4,915, with $5,080 above if price closes back over $4,915. Support is near $4,307, then about $4,100 if $4,307 breaks.

Central Bank Demand And Macro Drivers

Central banks added 1,136 tonnes of gold worth around $70 billion in 2022, the highest annual purchase on record. Gold often moves inversely to the US Dollar and US Treasuries, and is priced in dollars. Looking back at the events of 2025, we saw a complex reaction in the markets to the threat of a US ground invasion in Iran. Gold initially fell towards $4,450 on fears of tighter monetary policy, even as oil prices surged past $102 a barrel. The conflicting reports, with President Trump suggesting a deal was near while military posturing increased, created significant uncertainty. Now, in March 2026, those direct military threats have subsided, but underlying tensions in the region remain, keeping a floor under oil prices. The deal mentioned last year never fully materialized, leaving the market highly sensitive to any new developments. This creates an environment where headline risk is still a major factor for both energy and precious metals derivatives. Given the market’s sharp reversal last year, implied volatility on gold options remains elevated. The CBOE Gold Volatility Index (GVZ) has averaged over 18.5 for the past six months, well above its historic norms, indicating the market expects continued price swings. This suggests that buying straddles or strangles could be a viable strategy to profit from sharp price moves in either direction, regardless of the trigger. With crude oil inventories remaining tight, as seen in recent EIA reports showing draws for several consecutive weeks, the market is primed to overreact to supply threats. We should consider using long-dated call options on WTI or Brent to hedge against a sudden price surge. The rapid 3% jump we saw during the 2025 scare serves as a clear historical precedent for this dynamic. On a fundamental level, the long-term case for gold is supported by persistent central bank buying. The latest World Gold Council report for the fourth quarter of 2025 showed that central banks added another 290 tonnes to their reserves, continuing a multi-year trend of accumulation. This activity provides a strong support level, suggesting that significant dips could be viewed as accumulation opportunities. The biggest variable remains the US Federal Reserve’s policy, as the market is currently pricing in a nearly 70% chance of a rate cut by the third quarter, according to the CME FedWatch Tool. Any official signals from the Fed that they might move sooner would likely weaken the dollar and trigger a significant rally in gold. Therefore, we must closely monitor upcoming FOMC statements for any change in tone. Create your live VT Markets account and start trading now.

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