Gold (XAU/USD) fell about 0.20% on Monday as oil prices rose and inflation concerns increased. It traded at $4,734 after hitting $4,750 earlier in the day.
US President Donald Trump said Iran wanted to make a deal “very badly” and that it “did not agree to not having a nuclear weapon”. He also said the US would “get nuclear material back”.
Middle East Risk And Dollar Reaction
The US Dollar Index (DXY) turned negative after these comments, down 0.09% at 98.61. The US began a blockade in the Strait of Hormuz at 10:00 AM EDT on Monday to stop Iranian-flagged vessels and ships leaving Iranian ports.
US Existing Home Sales fell to 3.98 million in March, down 3.6% month on month and a nine-month low. Markets focused on the US-Iran situation instead.
San Francisco Fed President Mary Daly said a rate hold was more likely than a hike, and rates could stay steady if inflation remains high. US CPI rose 3.3% year on year in March, nearly 1% higher than February.
The US 10-year Treasury yield was 4.30%, down 1.5 basis points. Upcoming data includes ADP Employment Change (4-week average) and March PPI, forecast at 4.6% year on year.
Technical Levels And Volatility Setup
Technically, gold rebounded from $4,639, with the 20- and 100-day SMAs at $4,658–$4,668. Resistance is $4,750, then $4,800, $4,857, and the 50-day SMA at $4,897; support is $4,700, then $4,668/58 and $4,600.
Given the current date of April 14, 2026, gold is caught between the risk of a wider conflict with Iran and a Federal Reserve that is reluctant to cut rates due to inflation. The new US blockade in the Strait of Hormuz will be the primary driver of volatility, so we believe traders should consider strategies that benefit from large price swings. This means looking at options like straddles or strangles, which can profit whether the price moves sharply up or down.
The inflation picture is a significant headwind for gold, as it keeps Treasury yields high and strengthens the case for the Fed to hold rates. With March CPI jumping to 3.3%, a pattern similar to the sharp inflation spike we saw in early 2022, the upcoming 4.6% PPI forecast will be critical. This sustained pressure on prices makes buying long-dated call options expensive, suggesting traders might prefer call spreads to reduce the initial cost.
Rising Crude Oil prices are fueling these inflation fears, but we must also watch for any de-escalation in the Middle East. President Trump’s comments about Iran wanting a deal introduce serious headline risk for anyone holding long gold positions. This makes it crucial to protect against a sudden price drop, possibly by purchasing put options with a strike price below the key $4,700 level.
From a technical standpoint, the area around $4,660, where the 20- and 100-day moving averages meet, provides a strong support floor. We expect to see traders selling cash-secured puts with strike prices near this level, allowing them to collect premium while waiting for a potential dip to buy. Volatility in gold options will likely remain high, just as we saw the Gold Volatility Index (GVZ) stay above 18 during the geopolitical events of 2024.
In the coming weeks, the market will focus on the Producer Price Index report and any further developments from the Strait of Hormuz. A surprisingly high inflation number could send gold down to test the $4,660 support, while any escalation of the blockade could easily push it past the $4,800 resistance. Traders should be prepared for either outcome, as the current environment does not favor a one-sided bet.
