Gold (XAU/USD) began the week under pressure, trading near one-month lows at around $4,560, down nearly 1.10% on the day, as hawkish interest rate expectations and a firm US Dollar weighed on the non-yielding metal [1]. The US Dollar (USD) also strengthened against major peers, with USD/CHF trading around 0.7840, up 0.28% on the day, driven by renewed risk aversion and safe-haven demand [2].
Both articles cite escalating tensions in the Middle East, specifically an incident in the Strait of Hormuz, as a key driver of market sentiment. Iran’s Fars news agency reported that two missiles targeted a US naval vessel near Jask after it allegedly ignored warnings from the Islamic Revolutionary Guard Corps (IRGC) [1][2]. US officials, however, denied that any American vessel had been hit, with some sources describing the event as a warning shot with no confirmed damage [1][2]. The uncertainty surrounding the incident, coupled with Iran's warning that any US incursion would violate the ceasefire, has kept markets on edge [1][2].
The resulting geopolitical tensions have led to elevated Oil prices, sustaining global inflation risks and adding pressure on central banks, particularly the Federal Reserve (Fed), to maintain higher borrowing costs or even tighten policy further if inflation persists [1][2]. The CME FedWatch Tool indicates that markets expect the Fed to hold rates through this year, with the probability of a January 2027 rate hike rising to 22% from near 0% a week ago [1]. The US Dollar's strength is further supported by these hawkish Fed expectations and defensive flows, with the USD showing the strongest gains against the Australian Dollar (up 0.31%) and Swiss Franc (up 0.30%) among major currencies [2].
Looking ahead, traders are closely monitoring US-Iran developments and upcoming US economic data, including the ISM Services PMI, JOLTS Job Openings, ADP Employment Change, and Friday’s Nonfarm Payrolls (NFP) report, as well as speeches from Fed officials, for further clarity on the monetary policy outlook [1][2]. On the Swiss side, the Swiss Franc’s downside is limited by solid fundamentals, with the SVME Manufacturing PMI rising to 54.5 in April. However, Commerzbank notes that the Swiss National Bank (SNB) is unlikely to intervene heavily due to balance sheet risks and political constraints [2].
Technical analysis shows XAU/USD hovering just above the lower Bollinger Band at $4,533, with momentum softening and the price capped beneath the 20-period Bollinger Simple Moving Average [1].
CONCLUSION
Geopolitical tensions in the Middle East and a hawkish Fed outlook are driving safe-haven flows into the US Dollar while pressuring Gold prices. Market participants remain cautious, awaiting further developments in US-Iran relations and key US economic data for signals on future monetary policy. The Swiss Franc’s resilience may limit further USD/CHF upside, but overall market sentiment remains risk-averse.