Gold (XAU/USD) stayed supported above $4,550 in early European trade on Monday, though it remained capped within a near one-week range. Weekend developments lifted expectations of a potential US-Iran peace deal, pressuring the US Dollar (USD) and underpinning bullion, but unresolved disputes and hawkish US Federal Reserve (Fed) expectations limited USD weakness and restrained gains in the non-yielding metal. Axios reported late Saturday that the two sides were close to an agreement featuring a 60-day ceasefire extension and the reopening of the Strait of Hormuz, while President Donald Trump said the framework was largely negotiated; the ensuing drop in Crude Oil eased inflation worries and drove US Treasury yields lower in thin holiday liquidity, weighing on the Greenback.
Trump also told representatives not to rush, and said a naval blockade of Iranian ports would stay until a formal, certified deal is signed, while disagreements over Iran’s nuclear programme tempered optimism. In markets, bets on a Fed rate hike in 2026 provided a tailwind for the USD, leaving analysts looking for follow-through buying before confirming a near-term bottom around $4,450, the lowest since late March. Technically, price remains in a downward parallel channel, with the ceiling aligning with the 200-period EMA on the 4-hour chart near $4,650; MACD is above zero with a positive histogram, RSI sits in the mid-50s, support is seen near $4,360, and a break below would deepen the correction.
Competing Forces Shape Gold’s Near-Term Outlook
As of today, May 25, 2026, we see gold caught between conflicting forces, creating uncertainty for the coming weeks. The potential for a US-Iran peace deal is providing support, but the more dominant factor remains the Federal Reserve’s hawkish stance. Current market pricing from CME Fed Fund futures shows a greater than 70% probability of a 25-basis-point rate hike by the September 2026 meeting, which will likely strengthen the dollar and cap gold’s upside.
If a formal US-Iran agreement is signed, we could see a short-term rally in gold as the dollar temporarily weakens. Historically, however, such geopolitical de-escalations, like the initial 2015 Iran nuclear deal, often have a muted long-term impact on gold when offset by strong monetary policy. Therefore, we would view any rally towards the $4,650 resistance as an opportunity to look for signs of exhaustion rather than a new bullish trend.
Options Markets Highlight Trading Opportunities Amid Uncertainty
The primary driver for gold remains the Fed’s commitment to controlling inflation, which means pressure on non-yielding assets will continue. The technical picture confirms this bearish outlook, with gold trading within a downward channel. We believe traders should consider buying put options with strike prices below the $4,450 level to prepare for a potential break below the channel support around $4,360.
This environment of high uncertainty is reflected in the options market, where implied volatility for gold has risen in the past week. The CBOE Gold Volatility Index (GVZ) is up to 17.5, suggesting traders are pricing in a larger-than-usual price swing in the near future. This makes strategies like straddles, which profit from a significant move in either direction, more expensive but potentially rewarding if the range breaks.
Given the mixed signals, we are avoiding large futures positions and instead focusing on defined-risk options strategies. Buying slightly out-of-the-money call or put options allows us to position for a breakout from the current range while keeping our initial capital outlay small. This approach provides flexibility to react whether the catalyst is a peace deal or a hawkish statement from the Fed.
