Gold (XAU/USD) traded sideways on Thursday in early Europe, holding above $4,700 after falling from a three-week high. Doubts about the US-Iran ceasefire supported the US dollar and weighed on gold, while the Federal Reserve’s more dovish outlook limited further dollar strength.
Israel launched a large wave of air strikes across Lebanon, and the White House said Lebanon is not included in the two-week US-Iran ceasefire. Iran then shut shipping through the Strait of Hormuz and threatened to leave the ceasefire if attacks on Lebanon continue, which supported the US dollar and pressured gold.
Fed Outlook And Energy Driven Inflation Risks
Minutes from the March 17–18 FOMC meeting showed officials were in no rush to cut rates, citing inflation risks linked to Middle East energy prices. Even so, policymakers still pointed to one rate cut by end-2026 and another in 2027, which capped the dollar’s rebound from a nearly one-month low and helped gold.
Traders awaited the US PCE Price Index later on Thursday and the US CPI report on Friday. On charts, gold stayed below the 200-period 4-hour SMA and the 50.0% March retracement, with MACD negative and RSI near 52.
Support sits at $4,604 (38.2%), then $4,412 (23.6%) and $4,102. Resistance is at $4,758 (50.0%), then $4,895–$4,914, and $5,000.
Given the tension between a fragile US-Iran ceasefire and a dovish Federal Reserve, we see implied volatility in gold options climbing. The CBOE Gold Volatility Index (GVZ) has ticked up to 22.5, its highest level in three months, as Iran’s closure of the Strait of Hormuz sent Brent crude futures surging past $115 a barrel. This environment suggests preparing for sharp price swings rather than betting on a clear direction.
Options Strategies For A High Volatility Setup
With the crucial US PCE and CPI inflation reports due, traders should consider strategies that benefit from a large price move, regardless of direction. We recall how a hot CPI print back in late 2025 stalled a promising rally, and with last month’s CPI coming in at a slightly elevated 3.1%, the market is on edge. Buying straddles or strangles on XAU/USD could be a prudent way to play the potential breakout from the current consolidation around $4,700.
For those with existing long positions, the technical weakness below the $4,758 resistance level is a concern. To hedge against a potential drop triggered by strong inflation data or further military escalation in Lebanon, buying put options with strike prices near the $4,604 support level offers downside protection. This approach allows participation in any upside while capping potential losses if the fragile geopolitical situation deteriorates further.
Conversely, the Fed’s signal for one rate cut this year creates a floor for gold, limiting the downside. We have seen Fed funds futures pricing for a December 2026 rate cut fall to a 45% probability from 70% last month, meaning any surprisingly soft inflation data could cause a rapid repricing and send gold higher. Cautiously bullish traders might look at bull call spreads to target a move toward the heavier resistance zone near $4,900, limiting the upfront cost of the trade.
