US consumer credit rose by $9.48bn in February. This was below the expectation of $10bn.

The weaker than expected consumer credit figure for February is a signal that consumer spending, a key driver of the economy, is cooling. We should view this not as a one-off number but as a potential leading indicator of a broader economic slowdown. This suggests consumers are becoming more cautious, either by choice or due to tighter lending standards.

This data point makes it more difficult for the Federal Reserve to justify any further interest rate hikes in the near future. In fact, if we see continued weakness in upcoming data, the market will begin to price in a higher probability of a rate cut before the end of the year. Traders should therefore consider positions that would benefit from lower or stable interest rates, such as buying SOFR futures.

This report adds to other cautious economic signals we have seen in early 2026, including the March jobs report which showed hiring slowing to 165,000, below the 180,000 consensus. Furthermore, the most recent ISM Manufacturing PMI reading fell to 49.8, indicating a contraction in the factory sector. This combination of data strengthens the case for a defensive trading posture.

For equity index derivatives, this points towards potential weakness, as slowing consumer activity will eventually impact corporate earnings. We are positioning for increased market volatility, anticipating that the VIX index could rise from its current level of 18. Buying protective put options on the S&P 500 or Nasdaq 100 indices seems prudent in the coming weeks.

We are particularly wary of the consumer discretionary sector, which includes companies in retail and automotive industries. We remember seeing a similar pattern in the third quarter of 2025 when slowing credit growth preceded a significant underperformance in ETFs like XLY. This historical precedent suggests that short positions on this sector could be profitable.

The US Dollar Index held near 99.80, close to last week’s peak at 100, as markets tracked the Iran conflict and a US deadline set for 8:00pm EST linked to the Strait of Hormuz. Tehran rejected a temporary ceasefire and cut communication with the US, while oil markets priced disruption risk.

US February core capital goods orders rose 0.6%, while headline durable goods orders fell 1.4%. Attention now turns to the FOMC minutes and PCE inflation data.

EUR/USD rose towards 1.1580 as the euro stayed supported by expectations of possible ECB tightening if oil-driven inflation persists. GBP/USD moved up towards 1.3270, while the pound remained near a more than four-month low against the dollar.

USD/JPY traded around 159.80, near levels previously linked to Japanese intervention. Japan’s 10-year JGB yield reached a 27-year high of 2.43%.

AUD/USD traded near 0.6960 against a backdrop of recent RBA hawkishness. WTI crude reached about $117 per barrel before easing to $113.40, with some physical grades near $150 and about 12 million barrels per day effectively disrupted.

Gold traded near $4,680, supported by uncertainty and China’s central bank extending gold buying to 17 months. The week’s diary includes EU Retail Sales, an ECB non-monetary policy meeting, NZ and US releases, and US CPI on Friday.

We are looking back at this time last year, in April 2025, when the conflict in the Strait of Hormuz sent oil prices soaring. WTI crude was pushing past $117 per barrel then, creating extreme volatility that we must now contrast with today’s more stable price of around $78. That crisis provided a stress test for markets, and the aftershocks are still setting up today’s trading opportunities.

The US Dollar Index was near 100 back then, fueled by safe-haven demand and expectations of a hawkish Federal Reserve. Now, with the latest March 2026 core PCE inflation data cooling to 2.1%, the narrative has completely shifted toward potential rate cuts later this year. Traders should consider using options on SOFR futures to position for a dovish pivot from the Fed, a stark reversal from the hawkish stance it held during the 2025 energy shock.

In Europe, the ECB was signaling rate hikes in early 2025 to combat the oil-driven inflation spike, which kept EUR/USD surprisingly resilient. That hawkishness faded as the global economy slowed in late 2025, and now the focus is on policy divergence with the US. We see opportunities in long EUR/USD call spreads to capitalize on the potential for the Fed to cut interest rates before the ECB does.

A year ago, USD/JPY was threatening to break 160, a level that put Japanese officials on high alert for currency intervention. After authorities did step in during the summer of 2025, the pair has settled into a more controlled range around 148. This suggests that selling volatility through strategies like short strangles could be profitable, as officials seem determined to prevent the explosive moves we witnessed last year.

The Australian Dollar was surging around this time in 2025, supported by a hawkish RBA, but this strength was short-lived as the commodity shock hit global demand. Today, with China’s latest manufacturing PMI showing modest expansion at 50.4, the Aussie’s fate is again tied to global growth prospects rather than last year’s chaotic energy prices. We believe playing the AUD against currencies with more domestic troubles, like the pound, offers a clearer path.

Gold was trading near a lofty $4,680 last April, supported by geopolitics but capped by the strong dollar. With tensions eased and the dollar having softened, gold has settled near $3,950, reflecting a calmer market environment. However, since central banks are still hesitant to cut rates too quickly, using gold call options remains a cost-effective hedge against any unexpected return of inflation.

Higher oil and gas prices linked to conflict in the Middle East are expected to raise costs for European building materials such as cement, concrete and bricks. Manufacturers in this sector use large amounts of energy, so higher input costs may be passed on to construction firms, lifting building costs and putting pressure on margins and activity.

From 2010 to 2020, the use of oil for heating in the sector fell sharply, but there was no further drop in the past five years. Between 2020 and 2025, companies mainly phased out coal, while gas use has stayed roughly unchanged for 15 years.

Energy Exposure And Cost Transmission

The sector’s exposure to oil and gas is described as similar to 2022, which suggests sensitivity to renewed energy price rises. An increase in building permits points to potential demand support, but ongoing recovery is linked to more stable energy markets and continued changes in production methods.

If production costs keep rising, sales prices may increase, which could weaken demand. The original article states it was produced with the help of an artificial intelligence tool and reviewed by an editor.

Given the recent surge in energy prices, we see a direct parallel to the cost pressures experienced in 2022. With Brent crude futures now trading above $95 a barrel, up 8% in the last month due to renewed conflict, European building material producers face significant margin compression. We should anticipate that these increased energy costs will be passed on, impacting the entire construction value chain.

This presents an opportunity to position for weakness in the European construction and materials sector over the coming weeks. The latest S&P Global Eurozone Construction PMI for March 2026 already fell to 48.2, signaling a contraction even before this energy price shock. We should consider buying put options on a sector index ETF or on specific, energy-intensive producers like Heidelberg Materials and Holcim.

Trade Structure And Historical Signal

The industry’s fundamental vulnerability has not changed much since last year. An analysis of the 2020-2025 period showed that while coal usage declined, the sector’s dependency on natural gas and oil has remained high. This structural exposure makes these companies particularly sensitive to the current energy market volatility.

A pair trade could effectively isolate this theme by going long an energy sector ETF while simultaneously shorting a construction materials ETF. Looking back at the 2022 energy crisis, we saw the STOXX Europe 600 Construction & Materials index underperform the broader market by nearly 15% in the six months following the initial price spike. This historical precedent suggests a similar divergence could occur now.

We will be watching the upcoming Q1 earnings reports for any downward revisions in profit guidance from these companies. The next release of building permit data will also be a key indicator of whether rising costs are beginning to stifle demand. Any further geopolitical escalation would likely act as an accelerant, making options with May and June 2026 expiries increasingly attractive.

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The Australian Dollar rose against the US Dollar on Tuesday as the US Dollar weakened ahead of a deadline set by US President Donald Trump for Iran to reach a deal or reopen the Strait of Hormuz by 8:00 p.m. Eastern Time (00:00 GMT on Wednesday). AUD/USD was near 0.6955, up about 0.54% on the day.

The US Dollar Index (DXY) traded around 99.80 after failing to hold above 100. The Australian Dollar also gained support from a firmer Chinese Yuan after the People’s Bank of China set the daily reference rate at 6.8854, its strongest level in nearly three years.

Technical Levels In Focus

On the daily chart, AUD/USD rebounded after holding above the 100-day Simple Moving Average at 0.6842. The pair is testing 0.6950, a prior support level that is now acting as resistance.

A move above 0.6950 could bring 0.7000 into view, close to the 50-day SMA at 0.7024. If the pair closes below the 100-day SMA, the next area in focus is 0.6700, described as a previous breakout zone.

The RSI has moved back towards 50. MACD remains slightly below its signal line but is rising towards zero, while the histogram is narrowing.

Looking back at the analysis from 2025, we see a market that was far more optimistic on the Aussie. Today, the US dollar is significantly stronger, with the US Dollar Index holding firm around 105.50, a stark contrast to the sub-100 levels seen back then. This has been a primary driver keeping AUD/USD suppressed below the 0.6600 handle in recent weeks.

Options Strategies And Macro Catalysts

The Australian dollar is also feeling pressure from its role as a proxy for China’s economy. Unlike the strong Yuan fixing we saw in 2025, recent data has been more mixed and has failed to provide a significant tailwind. The latest Caixin Manufacturing PMI for March 2026, for example, came in at 50.9, a slight cooling which has tempered enthusiasm about the recovery’s momentum.

From a technical standpoint, the pair is now contained within a much lower range, with key support found near the 0.6510 level and stiff resistance at the 50-day SMA around 0.6640. For derivative traders, this suggests that buying puts with a strike price below 0.6500 could serve as effective portfolio insurance against a potential break lower. Selling out-of-the-money call options above 0.6700 could be a strategy to generate income, banking on that ceiling holding firm.

The Reserve Bank of Australia’s decision to hold interest rates steady at its April 2026 meeting, citing persistent services inflation, has further contributed to this range-bound action. With Australian annual inflation last reported at 3.4%, the RBA is in a holding pattern, which tends to cap significant upside for the currency. This environment suggests implied volatility may stay relatively low, making long-dated options strategies less appealing for now.

We must watch for catalysts that could break the current stalemate, particularly the next US Non-Farm Payrolls report. A stronger-than-expected jobs number could reinforce the “higher for longer” Federal Reserve narrative, potentially sending AUD/USD to test the 0.6450 support zone we saw late last year. Any unexpected weakness in US data, however, could spark a short-covering rally back toward that 50-day moving average.

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Conflict in the Middle East has pushed up oil and gas prices. Higher energy costs are forecast to raise costs for European building materials such as cement, concrete and bricks.

Producers’ exposure to oil and gas is described as similar to 2022 levels. If energy prices stay high, manufacturers are likely to pass on higher costs to construction firms.

Energy Price Pass Through Risks

This cost pass-through could reduce profit margins in construction. It could also raise overall building costs and dampen construction activity.

From 2010 to 2020, the sector reduced the use of oil for heating by a large amount. There has been no further fall in oil use in the past five years.

Between 2020 and 2025, companies mainly reduced coal use. Gas use has stayed about the same for the last 15 years.

Building permits have risen recently. A longer recovery is linked to more stable energy markets and lower-energy production methods.

Market Positioning And Hedging

The article states it was created with help from an AI tool and reviewed by an editor.

With recent tensions in the Middle East pushing Brent crude back towards $95 a barrel, we are seeing a direct impact on energy-dependent sectors. This situation mirrors the pressures we observed back in 2022, where elevated energy prices were quickly passed on by producers. The European building materials sector, with its significant reliance on natural gas and oil, is particularly exposed to this renewed price shock.

Looking back, we can see that building material companies made little progress in reducing their oil and gas dependency between 2020 and 2025. While coal use was phased out, the reliance on gas has remained steady for over 15 years, leaving these firms vulnerable. The recent performance of the STOXX Europe 600 Construction & Materials index, which has underperformed the broader market by nearly 5% in the last quarter, confirms this vulnerability is now being priced in.

For the coming weeks, we should consider positioning for further downside in this sector as profit margins come under pressure. Buying put options on key players like HeidelbergCement or Saint-Gobain could be a direct strategy to capitalize on expected earnings weakness. This view is supported by Eurostat’s latest data from February 2026, which showed industrial producer prices for construction materials ticking up 1.2%, signaling that cost inflation is already taking hold.

Simultaneously, this provides an opportunity for a pair trade by going long on the energy sector. Elevated oil and gas prices that squeeze manufacturers will likely boost revenues for energy producers. We could look at call options on major European energy companies or futures contracts tied to European natural gas to hedge against, or profit from, the sustained high energy costs.

The glimmer of hope from a slight uptick in building permits we noted in late 2025 now seems fragile. The latest reports show a stall in new permits across Germany and France, suggesting that higher prospective building costs are already dampening construction demand. This rising uncertainty across the sector suggests an increase in implied volatility, making options strategies that benefit from price swings, such as straddles, potentially attractive.

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The Australian Dollar rose against the US Dollar on Tuesday as the US Dollar weakened ahead of a deadline set by US President Donald Trump for Iran to reach a deal or reopen the Strait of Hormuz by 8:00 p.m. Eastern Time (00:00 GMT on Wednesday). AUD/USD traded near 0.6955, up about 0.54%, while the US Dollar Index (DXY) was around 99.80 after failing to hold above 100.

The AUD also gained support from a firmer Chinese Yuan after the People’s Bank of China set its daily reference rate at 6.8854, the strongest in nearly three years. The AUD often moves in line with China-related developments due to Australia’s trade links with China.

Audusd Tests Key Resistance

On the daily chart, AUD/USD rebounded after holding above the 100-day Simple Moving Average at 0.6842. The pair is testing 0.6950, which has shifted from support to near-term resistance.

A move above 0.6950 could target the 0.7000 level and the 50-day SMA at 0.7024. Support remains near the 100-day SMA, and a daily close below it could point to 0.6700.

The RSI has moved back towards 50. The MACD remains below its signal line but is rising towards zero, and the histogram is narrowing.

We recall a similar dynamic back in 2025 when fragile sentiment over a US-Iran deadline weakened the dollar. That situation provided a clear playbook for how geopolitical stress can create opportunities in the AUD/USD pair. This pattern of a softening greenback during times of uncertainty appears to be re-emerging.

Trade Talks Add Market Fragility

Currently, renewed discussions around US-EU trade tariffs are creating similar fragility in the market. The US Dollar Index has consequently dipped 1.2% over the last two weeks, struggling to hold its ground around the 101.50 mark. This is putting broad-based upward pressure on other major currencies, including the Aussie dollar.

The Australian dollar’s strength is further supported by positive economic data from China. China’s latest report showed first-quarter GDP growth of 5.1%, beating expectations and reinforcing demand for Australian commodities. We’ve seen iron ore prices climb over 8% in the past month alone, directly benefiting Australian export values.

Given this backdrop, traders should consider positioning for further upside in AUD/USD. Buying call options with a strike price around 0.7150 could be a viable strategy to capture potential gains in the coming weeks. This allows for participation in the rally while limiting downside risk to the premium paid.

To manage risk, we should look at key support levels for placing protective put options. The 100-day simple moving average, now sitting near 0.6920, serves as a solid technical floor. A break below this level would signal a significant shift in momentum and a reason to exit bullish positions.

Current technical indicators support this positive outlook, unlike the mixed signals we saw in 2025. The Relative Strength Index is pushing above 60, indicating strong buying momentum is building. Furthermore, the MACD shows a clear bullish crossover, suggesting the uptrend has room to run.

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Brown Brothers Harriman expects four central banks to keep policy rates unchanged at meetings this week. These are the Reserve Bank of India (RBI), the National Bank of Poland (NBP), Peru’s central bank (BCRP), and the Bank of Korea (BOK).

The RBI is expected to hold at 5.25% for a second meeting on Wednesday. It may move its stance from neutral to restrictive due to a weaker inflation outlook.

Central Banks Expected To Hold

The NBP is expected to hold at 3.75% on Thursday after a 25bps cut on 4 March. Market pricing in swaps implies 60bps of hikes over the next 12 months.

Peru’s BCRP is expected to hold at 4.25% for a seventh meeting on Thursday. Headline and core CPI inflation rose in March above the bank’s 1 to 3% target range.

The BOK is expected to hold at 2.50% for a seventh meeting on Friday. Its six-month rate projection may shift to show hikes rather than a steady-rate path.

The Reserve Bank of India is expected to hold its repo rate at 6.0% this week, but the risk is not symmetrical. After March CPI data showed inflation re-accelerating to 4.9%, we see a risk of a more hawkish tone from the governor. This is a similar setup to what we saw back in 2025, when the board weighed a shift to a restrictive stance due to a worsening inflation outlook.

Forward Guidance In Focus

Poland’s central bank will likely keep its policy rate at 4.50%, but the focus is on the forward guidance from Governor Glapinski. The swaps market is currently pricing in over 50 basis points of hikes in the next year as wage growth remains stubbornly high. This echoes the dynamic from March 2025, when the swaps curve also priced in significant hikes that traders had to watch closely.

We anticipate Peru’s central bank will pause its easing cycle and hold rates at 5.00% for a second straight meeting. Upside inflation risks are re-emerging, with the latest March reading hitting 3.2%, putting it just above the bank’s 1-3% target band. We saw this same kind of inflation threat back in 2025, which ultimately kept the BCRP on hold for seven consecutive meetings.

The Bank of Korea is set to keep its policy rate unchanged at 3.50%, a level it has now maintained for over two years. The key risk for traders is a hawkish surprise in their forward projections, especially with the Korean won recently weakening past the 1400 per dollar psychological level. This reflects the same potential for a hawkish pivot we monitored in 2025, where the board considered signaling future hikes instead of a steady outlook.

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Gold (XAU/USD) traded in a choppy range on Tuesday, near $4,658, as markets awaited developments ahead of Donald Trump’s deadline for Iran. The deadline was set for 8:00 p.m. Eastern Time (00:00 GMT on Wednesday), with warnings linked to the Strait of Hormuz.

Trump said Iran must “make a deal or open up the Strait of Hormuz” and threatened to target Iran’s energy and civilian infrastructure if no agreement is reached. IRNA reported Tehran rejected a ceasefire proposal via Pakistan and issued a 10-point plan calling for a permanent end to the war, lifting sanctions, and a framework for safe passage through the Strait.

Market Reaction And Safe Haven Dynamics

Gold struggled to gain safe-haven demand, as the US Dollar stayed firm and liquidity demand remained elevated. Higher oil prices added to inflation worries and reduced expectations for interest-rate cuts.

March US CPI is due later this week, with forecasts of 0.9% month-on-month (from 0.3%) and 3.3% year-on-year (from 2.4%). Markets have largely removed expectations for rate cuts this year.

Central bank demand continued, with China adding about 160,000 troy ounces (about 5 tons) in March for a 17th straight month, and global central banks buying a net 25 tons in the first two months. On the 4-hour chart, price levels include the 100-period SMA near $4,654, the 200-period SMA near $4,908, the 50-period SMA around $4,585, and downside areas at $4,400 and $4,100. RSI stayed near 50, while MACD remained below its signal line.

We remember last year when the market was on edge over President Trump’s ultimatum to Iran, which created significant short-term uncertainty. Gold traded choppily around the $4,650 level as everyone waited for news on a potential deal. That situation provides a clear playbook for how markets react to this specific geopolitical threat.

A last-minute agreement was reached in 2025, which temporarily averted a crisis and caused a sharp drop in gold’s risk premium. However, with renewed diplomatic talks over the Hormuz passage scheduled for next month, similar tensions are resurfacing in April 2026. This history suggests any positive headlines could quickly pressure gold prices lower, while any breakdown in talks would provide a strong catalyst for a rally.

Trading Approaches And Volatility Positioning

Given this backdrop, traders should anticipate a rise in implied volatility in the coming weeks. Options strategies like long straddles could be effective for playing a potential price spike in either direction, as we have already seen gold’s implied volatility tick up 5% over the past week. This allows a trader to profit from a large move without having to predict the direction correctly.

The inflation dynamic that weighed on gold last year also persists. With the latest March 2026 Consumer Price Index (CPI) data coming in at a stubborn 3.5%, the Federal Reserve has signaled it will hold rates firm through the summer. This high-rate environment continues to create a headwind for non-yielding gold, capping its upside potential.

Despite these pressures, the long-term support from central banks should not be ignored. The World Gold Council just reported that global central banks added a record 310 tonnes in the first quarter of 2026, with China and India leading the purchases. This persistent buying provides a strong floor under the market, making aggressive short positions risky.

Currently, gold is struggling to break past the $4,850 resistance level. For traders expecting this tension to fade as it did in 2025, selling call spreads above $4,900 offers a defined-risk way to capitalize on a potential downturn. Conversely, if the key support at $4,720 fails, buying put options could be a prudent move to hedge against a sharper correction.

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BBH expects the Reserve Bank of India (RBI), National Bank of Poland (NBP), Peru’s central bank (BCRP) and the Bank of Korea (BOK) to keep policy rates unchanged at their meetings this week. The expected hold comes with different risk directions across the four banks.

The RBI is expected to keep the policy rate at 5.25% for a second straight meeting on Wednesday. A possible change would be a move from a neutral stance to a restrictive stance due to a weaker inflation outlook.

Central Banks Expected To Hold

The NBP is expected to keep the policy rate at 3.75% on Thursday, after a 25 bps cut on 4 March. Interest-rate swaps price in 60 bps of hikes over the next twelve months.

The BCRP is expected to keep rates at 4.25% for a seventh straight meeting on Thursday. Headline and core CPI inflation rose in March and moved above the bank’s 1 to 3% target range, which leaves open the chance of a hike.

The BOK is expected to keep the policy rate at 2.50% for a seventh straight meeting on Friday. A possible change is a more hawkish rate path, with hikes replacing a steady-rate view over the next six months.

Looking back at the analysis from early 2025, we can see that the hawkish risks we flagged in emerging markets largely materialized. Central banks in India, Poland, and Korea all proceeded with tightening cycles to combat the inflation that was becoming persistent at the time. This history provides a crucial backdrop for positioning derivative trades today.

Derivative Positioning Implications

For India, the Reserve Bank of India’s potential shift to a restrictive stance in 2025 was realized, with the policy rate eventually rising to 6.50% before pausing. With inflation now moderating to 5.1% as of February 2026, but still above target, the focus has shifted entirely from hikes to the timing of cuts. Traders should be using overnight indexed swaps to bet on the policy rate remaining elevated through the summer before any easing begins.

The market’s expectation for rate hikes in Poland during 2025 was also correct, as the NBP moved its policy rate up to 5.75% later that year. Now, the situation has reversed, with recent inflation data for March 2026 showing a sharp drop to just 2.5%, well within the bank’s target range. This suggests traders should position for rate cuts using Polish zloty forward rate agreements, as the NBP now has significant room to ease policy.

In Peru, the upside inflation risks we saw in 2025 led the BCRP to continue its hiking cycle before it became one of the first to begin easing policy. The policy rate, now at 6.00%, has been steadily decreasing from its peak as inflation has cooled to 2.8% annually. Traders should use options on Peruvian sol futures to protect against a potential pause in the easing cycle, as the bulk of the rate cuts may already be priced in.

The hawkish tilt we anticipated from the Bank of Korea in 2025 resulted in its policy rate moving to the current 3.50%, where it has remained for over a year. The BOK is now in a difficult position, with inflation still sticky at 3.1% while exports are showing signs of weakness. This conflicting data suggests traders should use strategies like strangles on Korean Treasury Bond futures to profit from a potential spike in volatility when the bank is eventually forced to move.

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Gold (XAU/USD) traded in a choppy range on Tuesday, near $4,658, as markets awaited developments ahead of a US deadline for Iran. Trading lacked clear direction as participants watched for truce or deal headlines.

Donald Trump set an 8:00 p.m. Eastern Time (00:00 GMT Wednesday) deadline for Iran to “make a deal or open up the Strait of Hormuz”. He also threatened strikes on Iran’s energy and civilian infrastructure if no agreement is reached.

Iran Deadline And Strait Of Hormuz Focus

IRNA reported Tehran rejected a ceasefire proposal via Pakistan and instead offered a 10-point plan. The plan includes a permanent end to the war, lifting sanctions, and a framework for safe passage through the Strait of Hormuz.

Gold has not seen sustained safe-haven demand, while the US Dollar stayed firm. Higher oil prices increased inflation concerns and supported expectations of higher-for-longer interest rates.

March US CPI is due later this week, with forecasts of 0.9% MoM versus 0.3% in February, and 3.3% YoY versus 2.4%. Markets have largely removed expectations for rate cuts this year.

Bloomberg reported China added about 160,000 troy ounces (about 5 tons) in March, the 17th straight month of buying. The WGC estimated global central banks bought a net 25 tons in the first two months.

Technical Setup And Options Strategy

On the 4-hour chart, XAU/USD formed a bearish flag, with the 100-period SMA near $4,654 and the 200-period SMA near $4,908. Support levels included the 50-period SMA around $4,585, then $4,400 and $4,100, while RSI hovered near 50 and MACD stayed slightly negative.

Given the choppy price action we saw in 2025 around the Iran ultimatum, the current environment calls for a focus on volatility. We see gold caught between renewed geopolitical risk premiums and the hard reality of a hawkish Federal Reserve. Derivative traders should consider strategies that profit from large price swings, as the market remains undecided on its next major move.

With implied volatility on XAU/USD options ticking up, purchasing straddles or strangles could be an effective strategy in the coming weeks. This allows a trader to profit from a significant breakout in either direction without having to predict the outcome of current Middle East negotiations. Recent CFTC data shows a notable increase in open interest for both out-of-the-money calls and puts, suggesting larger players are also positioning for a decisive move.

If we look back at the bearish flag pattern that formed in 2025, a similar setup could emerge if current tensions de-escalate. The powerful headwinds from a strong U.S. dollar and high interest rates have not gone away. A break below the current support near $4,585 would open the door for traders to buy put options, targeting the $4,400 level which acted as a key psychological zone last year.

The inflationary pressures mentioned in last year’s analysis remain a central theme for us. The latest Consumer Price Index (CPI) report for March 2026 showed headline inflation at a sticky 3.1%, reinforcing the view that the Fed will not cut rates before the fourth quarter. This keeps the opportunity cost of holding non-yielding gold very high, capping any significant rallies that aren’t driven by immediate safe-haven demand.

However, the long-term support from central bank buying is a factor that we cannot ignore. The World Gold Council’s final 2025 figures confirmed that central banks added a net 850 tonnes to their reserves, marking the second-highest year on record after the 2022 surge. This persistent demand provides a floor under the market, meaning any sharp sell-offs are likely to be viewed by institutional players as buying opportunities.

For the near term, we believe the best approach is to use options to define risk and capitalize on the market’s indecision. A trader could purchase puts to hedge against a drop toward the $4,400 support level while simultaneously holding a smaller position in longer-dated call options. This hedges against a potential macro-driven decline while retaining exposure to a sudden geopolitical flare-up, which historically has sent gold soaring.

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