Insights 
VT 
Gold prices are consolidating below $3,400 as market participants seek clarity on potential action against Iran by the US. The Federal Reserve held interest rates steady while updating targets for 2026 and 2027. Gold is supported by the 20-day Exponential Moving Average (EMA).
The precious metal faces resistance below $3,400 due to revised interest rate targets. Inflation risks have increased following new tariffs by the US, raising the 2026 and 2027 inflation targets to 3.6% and 3.4%, respectively. While gold performs well in high-inflation environments, prolonged high interest rates impact non-yielding assets.
Middle East Tensions Increase
Political tensions in the Middle East are bolstering gold prices. Concerns over Iran’s economy have grown as the US considers a potential strike. A Bloomberg report indicates that US officials are preparing for possible action against Iran, with President Trump not ruling out a strike.
Gold shows potential for further movement due to its price formation. It trades in an Ascending Triangle formation with support from the 20-day EMA. If it breaks above resistance, gold could enter new highs above $3,500. Conversely, a drop below $3,245 may lead to further declines.
The article outlines three main forces shaping the current mood in the gold market. First, there are concerns about potential military action by the US against Iran, which is injecting a dose of caution among traders. Second, there are signals from the Federal Reserve on long-term inflation expectations and interest rates. Third, gold’s price pattern is being closely watched for signs of a breakout or retracement. Each of these points carries clear implications for upcoming positioning in derivatives markets, especially in relation to volatility, directional bias, and timing.
From a technical standpoint, gold remains well-supported by its 20-day EMA, a commonly used indicator that suggests short-term trend strength. The metal’s current formation—an Ascending Triangle—tends to be interpreted as a bullish continuation pattern, although this is never guaranteed. As long as gold remains within this structure and maintains footing above $3,245, the current bias favours upside. However, a decisive drop below that level would suggest a shift in tone, possibly inviting a wave of selling pressure.
Revised Inflation Targets
From our perspective, it is worth focusing on the revised inflation targets released by the Federal Reserve, which now project 3.6% and 3.4% for 2026 and 2027. Powell’s decision to hold rates for now, while outlining higher long-term expectations for inflation, sends a coordinated message: rates might stay elevated longer than expected. This environment is not immediately favourable for gold, which, as a non-yielding asset, becomes relatively less attractive when real yields remain high.
Still, geopolitical concerns have a tendency to offset macroeconomic headwinds, at least temporarily. Market reactions suggest that traders have partially priced in the possibility of military tension worsening, but not fully. The Bloomberg suggestion that preparations are underway for a possible strike brings risk-premiums into sharper focus. That element of uncertainty—especially if diplomacy fails to gain traction—could lead to sharp, sudden moves in gold, triggered by newsflow rather than data. Such moves are difficult to hedge in real time, making pre-emptive strategies more effective in the current climate.
When price action tightens under a clearly defined ceiling, as it has just below $3,400, the breakout potential increases. Shorter-term implied volatility levels are not yet reflective of the political risk premium that could emerge, creating an asymmetry that we believe traders should monitor. On the derivative side, this opens the door for strategies favouring upside tail exposure while taking advantage of compressed volatility in nearer-dated structures.
In terms of downside, it would be unwise to ignore the potential for sharp corrections if expectations of a military engagement fade or if inflation data surprises markets by softening. A drop below $3,245 would change the near-term trend and force a re-evaluation of bullish positions. Standard protective puts or defined-risk spreads could serve a useful function here, especially against long physical or ETF exposure.
We expect choppy sessions in the weeks ahead. Macroeconomic signals are conflicting, and technical patterns tend to be reactive rather than predictive in such circumstances. One should watch both macro releases and geopolitical news feeds closely, maintaining a flexible strategy. In this environment, short-term conviction must be balanced with medium-term caution.
