Gold fell by over 2.30% on Friday, with XAU/USD at $4,551 after a low near $4,511. The drop followed worries that US-Iran hostilities could lift oil prices and add to inflation pressure.
US 10-year Treasury yields rose to 4.591%, up 10 basis points, near the 2025 high of 4.627%. The US Dollar Index (DXY) gained 0.33% to 99.19, adding pressure to bullion.
Oil moved higher after US President Donald Trump said he was losing patience with Iran, raising talk of renewed fighting. US inflation data earlier in the week reduced expectations of Federal Reserve easing.
Prime Terminal data points to the Fed holding rates unchanged in June and through year-end under Chair Kevin Warsh. Fed policymakers also kept the option of further rate rises if inflation stays firm.
Industrial Production rose 0.7% month on month in April, above the 0.3% forecast, after a 0.3% fall in March. Next week brings US housing and labour market data, plus remarks from Fed officials.
Technically, gold is trading around $4,500–$4,650, with the RSI moving lower. Support levels include $4,500, $4,351 and the 200-day SMA at $4,322, while resistance includes $4,600, the 20-day SMA at $4,662, $4,700, $4,729, $4,785 and $4,800.
Central banks added 1,136 tonnes of gold worth about $70 billion in 2022, the highest annual total on record. Gold often moves opposite to the US Dollar and US Treasuries, and tends to weaken when interest rates rise.
We are seeing a familiar pattern emerge, reminiscent of the inflation shock back in 2025. The tensions with Iran last year drove oil prices up, crushing gold as the market priced in aggressive central bank responses. That period established a clear playbook where rising Treasury yields and a strong dollar cap any significant upside for bullion.
The Federal Reserve, under Chair Warsh, ultimately followed through on that hawkish stance from 2025, with the Fed Funds Rate now sitting at 5.50% to combat the persistent inflation that followed. This restrictive policy has kept non-yielding gold under immense pressure throughout late 2025 and into this year. As of this morning, gold is trading near $4,420, well below the levels seen during last year’s scare.
Current data validates this cautious stance, as the 10-year Treasury yield is hovering around 4.75%, even higher than the 4.62% peak we saw in 2025. The most recent April 2026 inflation report showed the Consumer Price Index remains sticky at 3.8%, justifying the market’s belief that rate cuts are not coming anytime soon. This environment makes it difficult for gold to sustain any rally.
Given this backdrop, traders should consider buying put options or establishing bear put spreads on gold futures. The key technical levels identified last year, such as the $4,351 support and the 200-day moving average which now sits near $4,340, serve as logical price targets. This strategy offers a defined-risk way to profit if the pressure from high interest rates continues to weigh on the metal.
However, the geopolitical landscape remains fragile, and the situation with Iran could escalate without warning, just as it threatened to in 2025. For this reason, holding some cheap, out-of-the-money call options is a prudent hedge against a sudden flight to safety. This provides inexpensive insurance against a sharp, unexpected rally driven by international conflict.
The push and pull between restrictive monetary policy and simmering geopolitical risk creates an ideal environment for elevated volatility. Traders could look at long volatility strategies, like straddles or strangles, which would profit from a large price move in either direction. This approach allows us to capitalize on a market breakout without needing to perfectly predict whether the next major catalyst will be economic or geopolitical.
