Gold (XAU/USD) rose for a third straight session, extending gains to five of the past six days, and reached its highest level since 5 June at about $4,435 in Asian trade on Tuesday. A weaker US Nonfarm Payrolls report last Friday softened expectations of an immediate Federal Reserve rate rise, supporting demand for non-yielding bullion. However, markets still price a possible increase in borrowing costs by year-end as crude oil volatility linked to the Middle East keeps inflation risks elevated, while traders await US Consumer Price Index data on Wednesday and Producer Price Index figures on Thursday for clearer guidance on policy.
Oil’s move has been tied to renewed disruption risks: Iran said it would not resume talks with US President Donald Trump until his term ends on 20 January 2029, weighing on prospects for the Strait of Hormuz to reopen, and traffic through Bab el-Mandeb remains constrained by a Houthi blockade against Saudi Arabia. Technically, gold has broken above the 100-day SMA and the 50.0% Fibonacci retracement; RSI sits at 68.89 and the MACD histogram is positive, with resistance at the 200-day SMA near $4,498. Further caps appear at $4,514.92, then $4,669 and $4,866.98; support levels are $4,406 and $4,389, followed by $4,297, $4,162 and $3,945.
Event Risk and Market Drivers
We suggest derivative traders tread carefully in the coming weeks as gold hovers near $4,435, its highest level since June. While cooling US labor data has boosted bullion, the upcoming CPI and PPI releases this Wednesday and Thursday could rapidly shift the Federal Reserve’s rate outlook. To manage this immediate event risk, we should avoid chasing the current rally blindly and instead prepare for heightened volatility.
We must also keep a close eye on the Middle East, where shipping disruptions at the Bab el-Mandeb Strait continue to prop up oil prices and stoke inflation fears. Recent maritime data shows that commercial transit volumes through this crucial chokepoint have plunged by nearly 60% compared to safe levels, highlighting the severity of the supply chain bottlenecks. This energy-driven inflation threat means we cannot rule out a hawkish stance from the Fed, which would strengthen the US dollar and pressure gold.
Technical Outlook and Trading Strategy
From a technical perspective, we see that buyers remain in control as gold trades above its 100-day Simple Moving Average of $4,389. With the Relative Strength Index hovering at 68.89, momentum is strong but approaching overbought territory, making temporary pullbacks highly likely. We should look to establish long positions on dips toward the solid support zone between $4,406 and $4,389, using tight stop-losses to protect our capital.
If gold successfully clears the immediate resistance, we should target the 200-day Simple Moving Average at $4,498, followed by the next key Fibonacci level at $4,514.92. Options traders among us might utilize bull call spreads to capture this potential upside while limiting risk against sudden geopolitical shifts. Conversely, a clean break below the $4,389 support would signal that we need to pivot toward defensive put options to hedge against a deeper drop toward $4,297.
