Gold (XAU/USD) traded around $4,705 in early Asian trading on Thursday, after posting modest gains near $4,720 earlier in the session. Prices edged lower as markets reacted to a temporary two-week ceasefire between the US and Iran.
US President Donald Trump said on Tuesday he agreed to suspend bombing and attacks on Iran for two weeks, if Iran re-opens the Strait of Hormuz. Fighting continued in the region, including Israel-Hezbollah clashes in Lebanon, and Iranian officials said this breached the ceasefire terms.
Geopolitical Risk And Gold Pricing
Gold had faced selling pressure in recent weeks on concerns that higher oil prices from the conflict could lift inflation and limit interest-rate cuts. Gold is often sought during geopolitical uncertainty, but it offers no yield, which can weigh on demand when rates are high.
Federal Reserve minutes released on Wednesday said officials at the March meeting still expected to cut rates this year, despite uncertainty from the Iran war and tariffs. Policymakers said they must stay “nimble” as inflation remained above the Fed’s target, while hiring had been mostly flat over the past year.
Central banks added 1,136 tonnes of gold worth about $70 billion in 2022, the highest annual purchase since records began. The World Gold Council reported emerging economies including China, India and Turkey increased reserves.
We remember how the fragile ceasefire between the US and Iran in 2025 caused gold to dip below $4,750, creating a period of market uncertainty. That temporary calm provided a false sense of security, as underlying conflicts continued to simmer. The market dynamics have shifted significantly since then, and we must adapt our strategies accordingly.
Rate Cuts Back On The Table
The breakdown of that ceasefire last year led to sustained inflationary pressures that prevented the Federal Reserve from cutting rates as we had hoped. This kept a lid on gold prices throughout the second half of 2025, even as geopolitical risk remained high. Looking back, the Fed’s need to remain “nimble,” as stated in their March 2025 minutes, translated into a prolonged period of high interest rates.
Now, in April 2026, the picture is changing, as recent data shows inflation is finally beginning to cool. The latest Consumer Price Index (CPI) report for March 2026 showed a decline to 3.1%, the lowest reading in over a year. This has firmly put Fed rate cuts back on the table for later this year.
This shift in monetary policy outlook is a primary catalyst for gold. The CME FedWatch Tool is currently indicating a 65% probability of a rate cut by the September 2026 FOMC meeting. As a non-yielding asset, gold becomes significantly more attractive as interest rates are poised to fall.
For derivative traders, this environment suggests that positioning for upside in gold is prudent. Buying long-dated call options, such as those expiring in December 2026 with strike prices around $5,000, offers a way to capitalize on a potential rally driven by Fed easing. This strategy provides exposure to significant gains while capping the initial risk to the premium paid.
This bullish outlook is further supported by relentless demand from central banks, which has continued unabated. Recent World Gold Council data for the first quarter of 2026 shows global central banks added another 290 tonnes to their reserves. This consistent buying creates a strong floor for the gold price and signals confidence from major institutional players.
While the primary trend appears bullish, implied volatility remains elevated due to lingering geopolitical tensions. Therefore, using strategies like a bull call spread can be effective. This involves buying a call option at a lower strike price and selling one at a higher strike, which lowers the initial cost and defines the risk.
