Gold (XAU/USD) extended gains for a second session, trading near a two-week high around $4,141 in Asia and keeping $4,150 in view as the US Dollar (USD) eased. Price action was supported by talk of a potential US-Iran arrangement that could reopen the Strait of Hormuz, alongside the OPEC+ decision on Sunday to raise output from September, which pushed crude to its lowest level since June 13. Softer oil has helped temper inflation worries and, in turn, reduced hawkish Federal Reserve (Fed) expectations, adding support for the non-yielding metal.
Rate expectations remain a restraint. The Bureau of Labor Statistics reported JOLTS openings edged down to 7.36 million, while Kansas City Fed President Jeff Schmid and Philadelphia Fed President Anna Paulson pointed to the case for tighter policy, keeping bets for higher borrowing costs by year-end alive ahead of Friday’s Nonfarm Payrolls (NFP). Markets also await Wednesday’s ADP employment report and ISM Services PMI. On charts, gold has broken above the 200-period EMA on the four-hour view, with RSI near 65 and a positive MACD histogram; resistance is flagged above $4,130, while support sits near $4,115, then $4,065, $4,043-$4,042, $4,020 and $4,000.
Technical Outlook and Trading Strategy
We suggest derivative traders look for buying opportunities on minor pullbacks as gold targets the $4,150 level. Today’s surge past the key 200-period moving average, backed by a strong Relative Strength Index of 65, confirms that buyers are firmly in control. We can expect increased price swings today as the market reacts to the newly released ADP employment data and ISM Services PMI.
Macro Drivers, Historical Parallels, and Strategy
The potential reopening of the Strait of Hormuz and OPEC+’s plan to boost oil production in September are major drivers behind this soft-dollar environment. Historically, geopolitical tensions in the Middle East have driven gold prices up by an average of 10% to 15% within a few months due to safe-haven buying. As oil prices slide to their lowest levels since mid-June, easing inflation expectations are taking the pressure off the Federal Reserve to keep interest rates high.
With US job openings dipping to 7.36 million from the higher levels seen last year, the labor market is showing clear signs of cooling. This cooling trend supports our view that the Fed will ease up on interest rates, which historically acts as a massive catalyst for gold. For example, during the prolonged interest rate cutting cycle between 2000 and 2011, gold prices surged by over 280% as investors sought alternatives to the weakening US dollar.
For the coming weeks, we recommend using long call options or bull call spreads to capture further upside while capping potential risk. If gold prices experience a short-term correction back toward the $4,115 support level, we view this as a highly favorable entry point for bullish positions. Traders should prepare for Friday’s Nonfarm Payrolls report, as any weaker-than-expected jobs data could easily propel gold past the $4,150 threshold.
