Gold fell by about 2% as the US Dollar rose, after Donald Trump said the war on Iran could last two to three weeks. XAU/USD traded at $4,659 after dropping from a daily high of $4,800.
The US Dollar Index (DXY) rose 0.40% to 99.95, which weighed on Dollar-priced gold. Trump also warned that Iran’s energy and oil infrastructure could be targeted without a deal.
Geopolitical Updates And Market Reaction
A US official told Axios a damaged bridge shown online was used by Iranian forces to move missiles and parts from Tehran to launch sites in western Iran. Reports also cited explosions in Baghdad, while Iran’s President Pezeshkian said Iran is not seeking to widen the conflict.
US trade data showed the deficit widened in February as imports rebounded more than exports. Initial Jobless Claims for the week ending 28 March fell from 215K to 202K, below the 212K forecast.
Challenger data showed 60.62K job cuts in March, more than 24% higher than 2025 figures. The 10-year Treasury yield settled near 4.311% after earlier moving lower by nearly four basis points.
Markets are focused on March Nonfarm Payrolls, expected at 60K after February’s -92K, with unemployment seen at 4.4%. Technical levels cited include the 20-day SMA at $4,780 and the 100-day SMA at $4,632, with support at $4,500 and $4,351, and potential levels at $4,900 and the 50-day SMA at $4,948.
Central banks added 1,136 tonnes of gold worth about $70 billion in 2022, the largest annual purchase on record. Emerging market central banks such as China, India and Turkey have increased reserves.
Strategy Implications And Key Levels
The current situation presents a classic conflict for gold, with geopolitical risk being offset by a strong US Dollar. We see the market reacting to the idea of a contained, short war, which is strengthening the dollar for now. The upcoming Nonfarm Payrolls report is the immediate catalyst, and a number significantly better than the 60K forecast could push gold down to test its support at the 100-day Simple Moving Average around $4,632.
Given the high uncertainty surrounding both the conflict and the economic data, we believe using options to trade volatility is the most logical approach. A short-term straddle, which involves buying both a call and a put option, would be positioned to profit from a large price swing in either direction after the payrolls release. Key levels to consider for strike prices are the resistance at $4,780 and the support near $4,632.
We are reminded of the market action in January 2020, when gold spiked on news of a US strike against an Iranian general but quickly fell back as a full-scale war did not immediately break out. That historical pattern suggests that unless the current conflict escalates unexpectedly or directly involves other nations, the strong dollar may continue to cap gold’s upward potential. This makes any short-term rallies vulnerable to selling pressure.
The Federal Reserve’s stance is a significant headwind, as swaps markets are pricing in no rate cuts for the remainder of 2026. This high interest rate environment increases the opportunity cost of holding a non-yielding asset like gold, a dynamic we saw suppress prices during the aggressive hiking cycle of 2022 and 2023. We must watch the unemployment rate closely, as a sustained rise from the current 4.4% is one of the few things that could force the Fed to change its policy.
Despite this short-term pressure, we cannot ignore the strong underlying support from central bank buying, which set records back in 2022 and has continued as a major market force. Emerging economies have been consistently adding to their reserves, creating a solid floor under the market. Therefore, we would view any sharp, data-driven drop towards the $4,350-$4,500 range as a potential long-term buying opportunity.
