Gold rose for a fourth day after posting its highest-ever weekly close above $5,100 on Friday. It moved past $5,150 in early Monday trading in Asia, helped by trade uncertainty, Middle East tensions, expectations for Fed cuts, and a weaker US dollar.
Donald Trump announced a new tariff framework after a Supreme Court ruling against broad duties. A 15% global levy, the statutory maximum, was applied to goods imported into the US, raising fears of retaliation and supply-chain disruption.
Inflation Fed Cuts And Dollar Backdrop
US inflation data showed the PCE Price Index rose 2.9% year on year in December, with core PCE at 3.0%. Markets still price in two 25-basis-point Fed rate cuts this year, even though a March cut is seen as unlikely.
US GDP grew at a 1.4% annualised pace in Q4, down from 4.4% in Q3, during the longest-ever US government shutdown. The dollar eased from its highest level since 23 January, supporting gold.
Talks between US and Iran negotiators are due in Geneva on Thursday after Iran submitted a detailed nuclear proposal. Reports say Trump is considering a strike in coming days, with a larger option later if diplomacy fails.
Technically, gold is above the 200-period EMA at $4,864.04, while RSI is 73.23 and MACD remains above zero.
Strategy Positioning And Risk Management
Given the powerful upward trend in gold, we should maintain a bullish bias in our derivatives positioning. The breakout above the $5,100 mark is a significant technical confirmation, supported by fundamental drivers like global trade levies and geopolitical friction. This combination suggests that the path of least resistance remains to the upside for the coming weeks.
To add credibility to this view, central bank demand remains a powerful undercurrent for gold. Looking back at the data from 2025, we saw a near-record 1,050 tonnes added to official reserves, with emerging markets leading the purchases. Furthermore, the most recent January CPI report came in at 3.1%, reinforcing that inflation is proving sticky above the Fed’s target and bolstering gold’s appeal as a hedge.
For capitalizing on this momentum, buying call options with strike prices at $5,200 and $5,250 offers a leveraged way to participate in further gains with defined risk. For traders with a higher risk appetite, establishing long positions in gold futures contracts would directly track the price appreciation. We see the current environment as favorable for maintaining and adding to these long-oriented strategies.
However, we must respect the overbought reading on the Relative Strength Index, which sits above 73. A short-term pullback or consolidation is a real possibility before the next leg higher. To manage this risk, we should consider buying protective put options below the key $5,000 psychological level to hedge our long exposure against a sudden reversal.
Looking ahead, we must closely monitor the US-Iran nuclear talks scheduled in Geneva this week, as any negative outcome could trigger another safe-haven rush. Additionally, the upcoming March FOMC meeting will be critical for the market. Any language suggesting fewer than the two rate cuts currently priced in could trigger a sharp pullback and provide a better entry point for new long positions.
