Gold extended gains on Friday, up 0.89% to $4,379 after earlier sliding to a near two-month low of $4,235 in a week that included a Federal Reserve move. Support came as Oil prices softened even while Middle East tensions persisted, with the US and Iran exchanging attacks in the Persian Gulf and conflict continuing in the Red Sea between the Houthis and Saudi Arabia. Reports said the Houthis attacked the Arabian East-West Oil pipeline, forcing a shutdown that could delay shipments to Europe, though Saudi Aramco has not confirmed the claim. West Texas Intermediate remained subdued, while the US Dollar Index (DXY) was almost flat at 100.29.
Bond yields stayed elevated, with the US 10-year Treasury yield up nearly six basis points to 4.996% after the Fed’s unanimous 0.25% rate hike, and its dot plot pointing to at least one more increase. Industrial Production was unchanged at 0% MoM, versus 0.2% previously and 0.3% expected, while money markets priced a 55% chance of another rise at the October meeting. Elsewhere, the Bank of England held rates, and the Bank of Japan lifted its policy rate by 25 basis points to 1.25%. Technically, Gold met resistance near $4,400 after topping at $4,399, with potential targets at $4,450 and $4,500; downside levels include the 100-day SMA at $4,320, the 50-day SMA at $4,288, and $4,235. Central banks added 1,136 tonnes of Gold worth around $70 billion in 2022.
Key Levels, Central Bank Demand, and Trading Strategies
We should closely monitor the $4,400 resistance level on Gold (XAU/USD) as geopolitical tensions in the Middle East keep safe-haven demand elevated. Despite the Federal Reserve pushing the 10-year Treasury yield close to 5%, gold has rebounded sharply to $4,379. If the price manages to break cleanly above $4,400, we recommend derivative traders look for long call options or futures targeting $4,450 and $4,500.
This underlying strength is supported by massive institutional buying, similar to how central banks purchased a record-setting 1,037 tonnes of gold in 2023 and continued adding over 1,000 tonnes annually through 2024 and 2025. This persistent official demand creates a strong floor for the metal even when interest rates remain high. For option traders, this structural support makes buying protective puts on dips near the 50-day moving average of $4,288 an attractive hedging strategy.
Risk Management and Volatility in Energy Markets
On the other hand, if gold fails to clear the $4,400 ceiling, we should prepare for a short-term pullback toward the 100-day moving average at $4,320. A drop below the September 16 low of $4,235 would signal a deeper bearish trend, making short positions highly profitable. We must manage our risk tightly over the coming weeks, especially with a 55% market expectation of another Fed rate hike coming in October.
We must also keep a close eye on the energy markets, where recent Houthi attacks on the Arabian East-West Oil pipeline have caused shipping delays to Europe. Although West Texas Intermediate crude remains subdued for now, any sudden spike in oil prices will likely weaken the US Dollar and trigger a major breakout for gold. Trading volatility through straddles or strangles could be a smart way to capture these sudden, news-driven market swings.
