Gold (XAU/USD) extended a second day of losses on Friday, sliding under $4,050 in Asia as a firmer US Dollar weighed on the non-yielding metal. Support for the greenback came as higher crude oil prices stoked inflation concerns and reinforced expectations that US interest rates may stay elevated. The US military said it carried out another round of strikes against Iran on Thursday, its 13th consecutive night of operations, while CENTCOM cited targets ranging from command centres to drone storage and coastal surveillance linked to threats around the Strait of Hormuz. Retaliatory actions across Kuwait, Bahrain and Jordan, plus Houthi strikes on two Saudi oil tankers in the Red Sea, pushed oil to a new high since June 11.
Policy expectations also tightened after US Jobless Claims fell to their lowest level since September 1969, supporting the case for at least one US rate increase by year-end. Separately, President Donald Trump imposed new tariffs of 10% to 12.5% on 60 trading partners, covering 99.4% of US imports, adding to demand for the reserve currency ahead of next week’s FOMC meeting. Technically, gold’s rejection near the 200-period EMA and a retreat from the $3,960-$3,959 monthly low rebound left MACD below zero and RSI near 41; a break under $4,000 and $3,980-$3,975 would deepen bearish pressure, while resistance sits at the 200-period EMA of $4,158.08.
Market Risks and Trading Implications
We recommend that derivative traders brace for heightened volatility as escalating US-Iran conflicts threaten vital oil chokepoints. With the Strait of Hormuz handling roughly 20% of the world’s petroleum liquids, any prolonged shipping disruption is bound to keep crude prices elevated. We should position ourselves for persistent inflation fears, which will likely keep the US Dollar strong and continue weighing on gold.
Strong US labor data, highlighted by jobless claims plunging to historic lows not seen since 1969, gives the Federal Reserve ample room to keep interest rates elevated. This macro environment diminishes the appeal of non-yielding gold, so we favor short-term put options or bear put spreads on XAU/USD. We expect the upcoming FOMC meeting next week to confirm this hawkish outlook, further dampening gold’s recovery prospects.
Technical and Strategic Outlook for Gold
The introduction of sweeping tariffs ranging from 10% to 12.5% on key trading partners is driving a flight to safety, but specifically into the US Dollar. Historically, trade war fears bolster the greenback’s reserve status, which directly pressures gold denominated in USD. We suggest capitalizing on this dollar strength by shorting gold on temporary rallies.
Looking at the charts, gold’s failure to break above the 200-period Exponential Moving Average at $4,158.08 indicates that the sellers are firmly in control. With the RSI hovering near 41 and the MACD locked in negative territory, momentum points toward a test of the $4,000 psychological floor. We advise setting tight stop-losses just above recent intraday resistance levels while targeting the $3,980 to $3,975 support zone.
