Gold slipped on Monday as the US Dollar recovered from month-and-a-half lows after reported intervention by US and Japanese authorities in FX markets, which boosted the Japanese Yen. XAU/USD was trading at $4,037, down 0.12%, as attention shifted from US data towards Middle East developments following a pause in hostilities requested by Iran and other regional countries, according to US President Donald Trump. The US Navy blockade is set to remain until Iran agrees to terms including no nuclear weapon and keeping the Strait of Hormuz open, while the President said he would not allow Iran to charge for passage through Hormuz.
US macro data still moved markets: the ISM Manufacturing PMI for July rose from 53.3 to 55.6, above forecasts of 54, and at the fastest pace in four years; the employment sub-index increased for the first time since 2023, while prices paid pointed to elevated input costs. Falling oil prices fed expectations of a less hawkish Federal Reserve, with markets pricing 22 basis points of tightening by end-2026, although three policymakers dissented at the last meeting in favour of a 25-basis-point hike to keep inflation near the 2% target. Technically, gold has traded below $4,100 since mid-last week and under the 200-day SMA, with RSI below 50; levels in focus include support at $4,022, then $4,000 and $3,959, while resistance sits at $4,100, $4,165, the 50-day SMA near $4,185, and $4,202. Central banks added 1,136 tonnes of gold worth around $70 billion in 2022, the highest annual purchase on record.
Bearish Technicals and Strategy Recommendations
We believe derivative traders should prepare for near-term downward pressure on gold as XAU/USD hovers around $4,037, below its 200-day Simple Moving Average. The Relative Strength Index is trending below the 50-neutral mark, which signals fading bullish momentum. We suggest utilizing short positions or put options targeting the key support level at $4,022, with a further eye on the psychological $4,000 floor.
Macro Trends, Geopolitics, and Trading Tactics
This bearish outlook is reinforced by the latest US ISM Manufacturing PMI, which jumped to a four-year high of 55.6 and boosted the US Dollar. While geopolitical tensions involving the US Navy blockade in the Strait of Hormuz could spark sudden safe-haven spikes, the strong economic data keeps the Federal Reserve hawkish. We advise keeping a close watch on this week’s upcoming non-farm payrolls and ADP employment reports, which will likely dictate the next big currency swing.
To back this strategy, historical data shows that CME gold options trading volumes typically spike by more than 25% during major US jobs weeks as institutional players hedge their portfolios. Additionally, despite robust central bank demand—which has consistently topped 1,000 tonnes annually in recent years according to the World Gold Council—rising yields continue to cap gold’s upward potential. We recommend setting tight buy-stop orders just above the $4,100 resistance level to protect short positions from any sudden geopolitical disruptions.
