Gold continued to retreat on Tuesday, testing $4,050 after slipping back from above $4,100, with attention turning to the two-day Federal Reserve meeting that begins later in the session. The US Dollar stayed firm near three-week highs as rate-hike expectations built: markets price a roughly 38% chance of a 25-basis-point move in July, up from 16% a week ago, and an 81% probability of a hike in September, according to the CME Group FedWatch Tool. Those expectations have outweighed relief from easing oil prices and reduced inflation fears following a pause in the US-Iran conflict, while a chipmaker sell-off in Asia has further supported the Dollar.<\/p>\n
On the daily chart, XAU\/USD was at $4,047.22, trading below the 21-day SMA at $4,070.45 and also under the 50-, 100- and 200-day SMAs, clustered from about $4,213 to $4,493. Momentum remains muted, with the RSI (14) at 44.99, and a Bear Cross confirmed after the 100-day SMA closed below the 200-day SMA on 22 July. Resistance levels are seen at $4,070.45, then $4,212.98, followed by $4,458.42 and $4,492.57.<\/p>\n
We advise derivative traders to position for continued near-term downside in gold as the US Dollar maintains its strong upward momentum. With the greenback hovering near three-week highs and the 10-year US Treasury yield climbing back toward 4.35%, non-yielding bullion is facing severe pressure. Historically, when the US Dollar Index gains over 1.5% in a short period, gold derivative volumes typically shift heavily toward bearish put options.<\/p>\n
The sudden jump in July rate hike expectations to 38%\u2014up from just 16% last week\u2014means we should brace for heightened volatility. Given these hawkish shifts, buying short-dated put options with strike prices targeting the psychological $4,000 support level offers a strong tactical setup. We recommend utilizing bear put spreads to mitigate the high premium costs associated with the impending Federal Reserve interest rate decision. <\/p>\n
Technically, the recent “Bear Cross” on July 22, where the 100-day moving average slipped below the 200-day average, confirms that sellers are firmly in control. We can leverage this trend by writing call options near the 21-day simple moving average of $4,070, which now acts as a strict ceiling. Any corrective rallies toward this resistance zone should be viewed as prime opportunities to establish new short positions in the futures market.<\/p>\n
While easing geopolitical tensions in the Middle East have taken the safety premium out of commodities, unexpected macroeconomic data could still trigger sharp short-covering rallies. To protect our portfolios, we must maintain strict stop-loss orders just above the 50-day moving average at $4,213. Balancing these bearish gold plays with long positions on the USD will help us navigate this choppy interest rate environment in the coming weeks.<\/p>\n\n\n\n