Gold (XAU/USD) rose to a weekly high early on Monday in Europe as the US and Iran announced a deal to end their conflict, due to take effect on Friday. The US said it would lift its naval blockade on Iranian ports and reopen the Strait of Hormuz once the agreement is signed, while the UK, France, Germany and Italy indicated they were prepared to lift sanctions linked to steps on Iran’s nuclear programme. Iran described the talks as a 60-day negotiation process tied to three conditions: ending the blockade, ending the state of war and military operations, and releasing frozen funds. In rates markets, CME FedWatch showed the implied probability of a Fed hike in December at nearly 64%, down from 69% last week.
On the chart, spot gold remains below the 100-day SMA and beneath the Bollinger middle band, with the RSI near 42. Resistance levels sit near $4,415, then around $4,685, and the 100-day SMA near $4,762. Support is indicated around $4,142 at the lower Bollinger band, with a break pointing towards a deeper retracement towards prior lows.
Market Reaction and Technical Outlook
We see the current rise in gold as a temporary reaction to shifting interest rate expectations rather than a new bullish trend. The peace deal’s primary effect is reducing geopolitical risk, which historically dampens demand for safe-haven assets like gold. This rally towards resistance is likely an opportunity to position for a reversal.
The market is focusing on the CME FedWatch tool, which has lowered the odds of a December rate hike, but this is a secondary factor. Last week’s US Consumer Price Index (CPI) for May 2026 came in at a still-elevated 3.1%, and with the Strait of Hormuz reopening, we expect oil prices to fall, which will be disinflationary in the long run. This reduces gold’s appeal as an inflation hedge.
Technically, gold remains in a weak position below its 100-day simple moving average. We view the current move as a corrective bounce that is likely to be sold into as it approaches resistance near the $4,415 level. The underlying momentum indicators do not support a sustained move higher from here.
Strategic Perspective and Historical Context
For derivative traders, this presents an opportunity to buy put options expiring in the next 4 to 6 weeks. This strategy allows us to profit from a potential decline as the market digests the full impact of the peace deal, while also capping our potential loss. Implied volatility may be low given the “good news,” making options relatively cheap.
We must acknowledge that central bank buying remains a strong supportive factor for gold. The World Gold Council’s Q1 2026 report showed that global central banks added another 290 tonnes to their reserves, continuing the trend from recent years. This consistent demand is likely to provide a floor and prevent a dramatic price collapse.
Historically, the removal of a major geopolitical risk premium has led to weakness in gold. Following the end of the first Gulf War in 1991, gold prices drifted steadily lower for months as stability returned. We anticipate a similar pattern could unfold, where this initial rally fades and gives way to a medium-term downtrend.
