Gold steadied on Monday after last week’s surge, with XAU/USD near $4,330 after an intraday peak of $4,362. The metal rose more than 7% last week and touched its highest level since June 17, as weaker-than-expected US Nonfarm Payrolls data pushed markets towards a more dovish repricing of Federal Reserve rate-hike expectations. Oil prices eased on reports that Iran and Oman were closer to finalising an agreement to reopen the Strait of Hormuz, tempering inflation worries and weighing on the US Dollar and US Treasury yields, even as crude remains above pre-war levels.
The US Dollar Index traded around 99.79, up 0.19%, while the 10-year US Treasury yield held near 4.67%, below its 4.74% peak, the highest since January 2025. CME FedWatch showed a 44% implied probability of a September rate hike, down from 67% a week earlier, with focus shifting to US CPI on Wednesday and PPI on Thursday. XAU/USD held above the 50-day SMA near $4,150 but below the 100-day SMA around $4,389, with the RSI in the mid-60s and the ADX in the high-20s; resistance sits near $4,389 then $4,500, while support is seen at $4,150 and $4,000.
Gold Outlook Amid Dovish Fed Repricing and Strategic Trading Opportunities
We suggest derivative traders closely monitor gold as it consolidates around $4,330 after a powerful 7% surge last week. The market is currently balancing easing Middle East tensions against crucial upcoming US economic data. We believe this temporary pause offers a strategic window for traders to position for the next breakout.
With market expectations for a September rate hike dropping sharply to 44% from 67% last week, the US dollar is struggling to hold its ground. Historically, gold prices have risen by an average of 8% in the three months following a significant dovish shift in investor sentiment. We expect this week’s upcoming CPI and PPI data to confirm this trend, potentially pushing the US Dollar Index even further below its current 99.79 level.
Tactical Trade Ideas and Geopolitical Watchpoints
To capitalize on this environment, we recommend utilizing bull call spreads on gold options targeting the $4,389 resistance level, which aligns with the 100-day Simple Moving Average. This approach limits upfront cost while positioning traders for a strong upside move if inflation prints softer than expected. For futures traders, we favor establishing long positions with protective stop-losses placed just below the 50-day Simple Moving Average of $4,150.
We must also watch the diplomatic efforts surrounding the Strait of Hormuz, as any finalized deal to reopen the shipping lane will drag oil prices and treasury yields lower from the current 4.67% mark. Lower energy costs will ease inflation fears, which typically hurts the dollar and provides a tailwind for precious metals. However, because geopolitical situations remain highly unpredictable, we advise keeping position sizes manageable to guard against sudden market reversals.
