Gold's Deceptive Calm Masks Real Weakness as Oil Optimism Clouds the Picture

Markets opened the week with a striking reversal from the pattern that has defined the past 17 days, and traders who read the surface-level price action in gold may be drawing the wrong conclusions.

Since the conflict in the Middle East erupted roughly two and a half weeks ago, safe-haven assets moved in lockstep. On Monday, March 2nd — the first trading day after a coordinated U.S.-Israeli strike that effectively greatly weekend Iran's military leadership and killed Supreme Leader Ali Khamenei — both gold and the U.S. dollar gapped higher at the open, reflecting the classic flight-to-safety trade. Yet by the close of that session, a telling divergence emerged: the dollar pushed higher while gold reversed to close below its opening price, a signal of relative weakness that has since been largely overlooked.

Crude oil followed a similar intraday script on that first Monday. Prices had been hovering near $67 per barrel ahead of the strikes, gapped sharply higher at the open, but ultimately settled at $71 on the close — below the day's high. What has followed is a pattern as consistent as it has been instructive: every Monday since has printed a large red candle in oil, only to be followed by a week of steady green as prices climbed substantially. Monday acts as a shakeout; the underlying bid reasserts itself the rest of the week.

False Optimism in the Strait

Today's selloff in crude is being attributed to weekend developments in the Strait of Hormuz, where several oil tankers reportedly navigated the waterway without incident. India is said to be coordinating the passage of six additional vessels, and multiple nations are reportedly working back channels with Tehran to secure safe passage for their fleets.

This optimism, however, may be misplaced. Iran has not reversed its position — it has refined it. Tehran's stated posture is not one of closing the Strait outright, but of "controlling" it, with access denied specifically to vessels tied to the United States and Israel. That is not a de-escalation. That is a blockade with a narrower target list.

The events of this weekend underscore that reality. U.S. forces struck Iranian military installations on Kharg Island — the terminal through which Iran channels nearly all of its oil exports. In response, Iran launched fresh attacks across the Persian Gulf, disrupting operations at a critical UAE oil hub and forcing the temporary closure of Dubai's airport. The conflict is not winding down. It is widening.

The prevailing read on this Monday's red candle in oil, therefore, is likely mistaken. If the pattern of the past three weeks holds, the rest of this week should see oil prices recover and extend gains. The supposed opening of the Strait is not the structural shift the market appears to be pricing in.

For gold specifically, today's session looks deceptively neutral. Prices appeared to trade roughly flat on the day — but that reading requires an important adjustment.

The U.S. Dollar Index fell by nearly 0.7% on Monday. Because gold is priced in dollars, a weaker dollar provides a mechanical tailwind that flatters the headline number. Strip out that currency effect and gold's performance today was negative in real terms. The metal fell; it simply fell less than it would have in a stable-dollar environment.

This matters because it reinforces the broader thesis: if and when oil prices resume their climb later this week — as the geopolitical fundamentals suggest they should — the dollar is likely to find its footing again. And a recovering dollar would remove the veil currently masking gold's softness, exposing further downside in the near term.

The gold trade heading into this week is not as flat as Monday's candle implies. The interplay between oil, the dollar, and safe-haven demand is at a pivotal juncture. Traders treating Monday's dip in oil as a genuine ceasefire signal are likely to find themselves on the wrong side of that trade by Friday.

For gold, the short-term path of least resistance remains lower — provided oil continues its recovery and the dollar stabilizes. Any meaningful rally in the precious metal will likely require either a genuine de-escalation in the Strait of Hormuz (not merely selective passage) or a deterioration in U.S. economic data significant enough to bring rate-cut expectations back onto the table. Neither condition appears imminent.

Wishing you as always good trading,