Gold fell more than 3% on Tuesday as the US Dollar rose during US–Iran talks reported as showing progress. XAU/USD traded at $4,869 after hitting a daily high of $5,000.
The US Dollar Index was up 0.17% to 97.25, while the US 10-year Treasury yield was 4.052% after earlier dropping by nearly four basis points. Mixed risk sentiment, firmer yields, and a stronger Dollar weighed on bullion.
Market Drivers And Fed Expectations
Strong recent US payrolls data and uncertainty over the path of Federal Reserve rate cuts kept gold trading around $5,000. ADP’s 4-week average showed 10.3K jobs added, up from an upwardly revised 7.8K.
New York’s February Empire State Manufacturing Index pointed to an improvement in regional factory conditions. Markets shifted Fed cut pricing from 62 basis points to 57 basis points, based on CBOT data.
US and Iran began talks and agreed on main “guiding principles” in the second round in Geneva. Peace talks involving the US, Russia, and Ukraine were moved to Wednesday.
Gold made lower highs for three days and hit a six-day low of $4,841; below $4,800, support sits at the 50-day SMA of $4,632. Above $5,000, resistance is $5,100.
Options Positioning And Volatility
Given gold’s sharp 3% drop yesterday, we see an opportunity in the options market. The failure to hold the psychological $5,000 level suggests weakness, making bearish positions like buying put options or selling call credit spreads attractive. We’ve seen the CBOE Gold Volatility Index (GVZ) jump 9% in the last 24 hours, indicating traders are pricing in larger price swings ahead.
The shift in Federal Reserve expectations is a primary driver for this move. With strong economic data trimming expected rate cuts from 62 to 57 basis points, the US Dollar is finding renewed strength. This morning’s Producer Price Index (PPI) report, showing an unexpected 0.4% monthly increase, reinforces the view that the Fed may delay easing and keep pressure on non-yielding gold.
Geopolitical developments are also removing a key pillar of support for gold prices. Progress in talks between Washington and Tehran reduces the metal’s safe-haven appeal, a scenario we also observed in 2015 when similar diplomatic efforts led to a multi-month decline in gold’s risk premium. The upcoming talks involving Russia and Ukraine will be watched closely, as any further de-escalation could accelerate gold’s decline.
From a technical standpoint, the next major support level to watch is the $4,800 mark. A break below this level would open the door to a test of the 50-day moving average, currently near $4,632. We would consider buying put options with strike prices near $4,800 to capitalize on a potential breakdown.
Looking ahead, the upcoming Core PCE inflation report is the most critical catalyst on the calendar. We observed last year in 2025 that gold’s price moved an average of 2.1% on the day of the Core PCE release, so positioning for volatility is key. Traders should prepare for significant movement as this data will heavily influence the Fed’s next move.
