Gold (XAU/USD) eased to about $4,060 in Asian trading on Monday, with flows pressured by uncertainty over US-Iran talks and expectations for a hawkish Federal Reserve. The US and Iran agreed to halt attacks and are set to meet in Doha, Qatar, on Tuesday, according to Axios, after an exchange of fire near the Strait of Hormuz over recent days. Markets now await the US Nonfarm Payrolls release on Thursday for further direction on the interest-rate path.
Tensions remain a live variable after Iran’s Foreign Minister said responsibility for the Strait of Hormuz lies with Tehran, while an Iranian official warned of “tension and escalation” if traffic bypasses its preferred route. Rate expectations are also firm: traders are pricing nearly a 59.7% chance of a rate hike as early as September 2026, based on the CME FedWatch Tool, and economists forecast June payrolls growth of 114,000 with the Unemployment Rate steady at 4.3%. Gold demand trends remain anchored by central banks, which added 1,136 tonnes worth around $70 billion in 2022, according to the World Gold Council.
Volatility Driven by Geopolitics and Federal Reserve Rate Bets
We are seeing gold face some selling pressure around the $4,060 mark, caught between geopolitical tensions and the prospect of higher interest rates. The upcoming US-Iran talks on Tuesday and the crucial US jobs report on Thursday are creating significant uncertainty. This setup suggests we should prepare for a potential spike in volatility rather than a clear, sustained trend in either direction.
The market is increasingly convinced the Federal Reserve will raise rates, with CME’s FedWatch Tool now showing a nearly 60% chance of a hike by September. This probability has climbed from just under 50% last month, showing a clear shift in market sentiment. Thursday’s Nonfarm Payrolls report is forecast at 114,000, which if met, would be lower than the average of 150,000 seen in the first quarter of 2026 and could temper those rate hike bets.
Options Strategies and Long-Term Support
Given these major upcoming events, we believe the best approach is to use options to trade the expected price swing. A long straddle strategy, which involves buying both a call and a put option with the same strike price and expiration, is well-suited for this environment. This position will be profitable if gold makes a sharp move in either direction following the news catalysts later this week.
For those with a bearish bias due to the strong US Dollar, which is trading near a six-month high, buying put options provides a way to target a break below the $4,000 psychological level with a defined risk. Conversely, call options can be used to speculate on a price surge if tensions in the Strait of Hormuz escalate unexpectedly. We advise against holding large, unhedged futures positions through these events.
While the short-term outlook is clouded, we acknowledge that underlying support for gold remains firm. Data from the World Gold Council for the first quarter of 2026 confirmed that central banks, particularly in emerging markets, continued to be strong buyers. This consistent demand should provide a solid long-term floor for the price, preventing a dramatic collapse.
