Spot gold opened the week slightly lower, with XAU/USD trying to hold $4,600 in early Asian trade. Market sentiment turned risk-off over concerns about a wider Iran conflict.
US President Donald Trump said on Tuesday that the US would destroy Iran if it does not reopen the Strait of Hormuz by Friday. He also threatened attacks on power plants and bridges if Tehran refuses after a ten-day truce, while Iran announced reciprocal attacks on US “or related” infrastructure.
Holiday Thinned Liquidity
Several Asian and European markets are closed for the Easter Monday holiday, with fuller participation expected in the American session. West Texas Intermediate (WTI) trades near $106 per barrel, its highest in over a month.
On the 4-hour chart, XAU/USD has fallen below the rising 20-period SMA near $4,663 and remains below the 100- and 200-period SMAs at $4,700 and $4,900. Momentum is below its midline, while RSI has moved towards 50 from overbought levels.
Support levels are $4,600 and $4,560, while resistance stands at $4,663, $4,680, and $4,785. A move above $4,680–$4,785 would shift focus back towards the 100-period SMA area above $4,700.
We remember the market tension from last year when threats to the Strait of Hormuz put gold under pressure. The $4,600 level was a critical support line as fears of a broader conflict with Iran spooked investors. That period showed us how quickly geopolitical headlines can shift momentum.
Oil Tightness And Renewed Inflation Friction
Today, those concerns are re-emerging, especially with WTI crude recently touching $108 a barrel, a high we haven’t seen since that 2025 scare. Recent reports from the U.S. Energy Information Administration show global oil inventories have drawn down by over 30 million barrels in the last quarter, making the market extremely sensitive to any supply disruption in the Middle East. This tightness in the oil market is directly fueling uncertainty.
At the same time, the latest US inflation data showed the Consumer Price Index holding at a stubborn 3.4%, keeping the Federal Reserve on alert. This persistent inflation creates a conflicting environment for gold, as it serves as a hedge but also faces headwinds from potential central bank hawkishness. Traders should therefore anticipate sharp, two-way price action.
Given this backdrop, we believe derivative plays on volatility are more prudent than outright directional bets in the coming weeks. The CBOE Gold Volatility Index (GVZ) has already climbed to 19.2, its highest point this year, suggesting the market is pricing in significant price swings. Buying straddles or strangles could allow traders to profit whether gold breaks sharply up through resistance or down through support.
The key levels from last year’s conflict remain relevant. We see the $4,600 mark as a major psychological floor where put option sellers will likely be active. For those with a bullish bias on escalating tensions, buying call spreads targeting a move above the $4,700 resistance offers a risk-defined way to position for a potential spike.
