Gold rebounded on Thursday after falling below $4,600, as sellers failed to keep it there. XAU/USD traded near $4,660 after touching $4,554 in the European session.
Risk mood improved after reports that Iran is working with Oman on traffic through the Strait of Hormuz. Tasnim reported an Iranian deputy foreign minister said a joint protocol is being drafted to ensure safe passage in the post-war period.
Gold Price Driven By Geopolitics And Fed Expectations
Earlier, gold fell as much as 4% after US President Donald Trump spoke about continued military action. He said the US is “on track to complete all of America’s military objectives shortly — very shortly” and warned the US would “hit them extremely hard over the next two to three weeks” and “bring them back to the stone ages.”
Markets now widely expect the Fed to keep rates at 3.50%–3.75% this year, based on the CME FedWatch Tool. This contrasts with earlier pricing for at least two rate cuts.
On the 4-hour chart, price stayed below the 100-period SMA near $4,711 and a bearish flag pattern was noted. Support sits near $4,600 and the 50-period SMA around $4,534, with downside targets at $4,200–$4,000 and resistance near $4,800 and $5,000.
Central banks added 1,136 tonnes of gold worth around $70 billion in 2022, according to the World Gold Council. This was the highest yearly purchase since records began.
Strategy And Risk Management Considerations
Gold’s rebound toward $4,660 should be viewed with skepticism, as the fundamental and technical backdrop appears weak. The conflict between Middle East headlines and a hawkish Federal Reserve is creating significant volatility. This environment suggests traders should consider selling into strength or buying put options to position for a potential decline.
The “higher-for-longer” interest rate story continues to be the main headwind for gold. The CME FedWatch Tool now prices in a less than 10% chance of a rate cut this year, a sharp reversal from the 50% probability we saw just three months ago. This firm policy stance from the Fed increases the opportunity cost of holding a non-yielding asset like gold.
This hawkish outlook is justified by recent data, with the latest Consumer Price Index (CPI) report showing a year-over-year increase of 3.8%, fueled partly by energy costs. We saw a similar dynamic back in late 2024, when sticky inflation ultimately overpowered gold’s safe-haven bid and sent prices lower. The market seems to be following that same script today.
The technical picture supports a bearish view, as a bearish flag pattern is forming on the shorter-term charts. The resistance near the $4,711 mark is a key level to watch for initiating short positions or selling call spreads. A confirmed break below the $4,600 support would likely trigger a faster move down toward the $4,534 area.
Given the uncertainty, trading volatility directly is an attractive strategy. The Gold Volatility Index (GVZ) has risen to levels not seen since the banking sector stress we experienced in 2025. This indicates that using options strategies like straddles, which profit from a large price move in either direction, could be more effective than a simple directional bet in the coming weeks.
