Gold (XAU/USD) gave up earlier gains at the start of US trading on Thursday and was little changed near $4,589 after touching an intraday high of $4,643. Earlier in the week it reached $4,697, the highest since May 14, but firmer US inflation data kept the Federal Reserve’s rate path in focus, with the PCE Price Index still above the Fed’s 2% target. The US Dollar (USD) recovered modestly as markets leaned towards a higher-for-longer stance, and Gold—despite its inflation-hedge status—fell about 1.40% on Wednesday as higher yields reduced the appeal of a non-yielding asset.
Recent PCE, CPI and PPI readings point to inflation no longer accelerating sharply, which could temper expectations of an immediate Fed hike; the CME FedWatch Tool puts the chance of unchanged rates in September at near 62%. Weekly US labour data also lent support to the Greenback, with Initial Jobless Claims at 203K versus forecasts of 208K and a prior 207K revised from 206K. The US Dollar Index (DXY) traded around 99.22, extending a rebound after pressure linked to US Treasury plans to increase buybacks of longer-dated securities. Focus turns to Fed Chair Kevin Warsh at Jackson Hole on Friday, while Middle East risks persist as vessel traffic through the Strait of Hormuz has yet to normalise, despite Iran and Oman citing an agreement that remains under negotiation; Qatar’s Prime Minister is in Tehran on Thursday. Technically, XAU/USD stays above the 50-day, 100-day and 200-day SMAs, with RSI in the mid-60s and MACD positive but fading; resistance sits at $4,700 then $4,900, while support is seen at the 200-day SMA near $4,525, the 100-day around $4,376, the 50-day near $4,200, and $4,000.
Derivative Strategies And Market Sentiment
We suggest derivative traders prepare for a period of consolidation as gold’s upward momentum slows down near the $4,589 level. Given that the market is pricing in a 62% chance of the Federal Reserve holding rates steady in September, aggressive long positions might face immediate headwinds. We recommend focusing on range-bound strategies, such as iron condors, to capitalize on this temporary pause in the gold rally.
With Fed Chair Kevin Warsh speaking at the Jackson Hole Symposium tomorrow and ongoing tensions in the Strait of Hormuz, sudden volatility spikes are highly likely. To hedge against this event risk, we favor buying short-term straddles to profit from sharp price movements in either direction. Historically, major central bank speeches at Jackson Hole have triggered average gold price swings of 1.5% to 2% in the days immediately following the event, making premium-buying strategies attractive.
Support, Resistance, And Technical Levels
For futures and options traders looking to buy the dip, the 200-day Simple Moving Average near $4,525 offers a strong technical floor. We advise selling out-of-the-money put options at or just below this $4,525 support level to collect premium while waiting for a clearer trend. If the price breaks below this floor, the next major support zone sits near the 100-day moving average at $4,376.
The US Dollar Index’s recovery to 99.22, backed by strong weekly jobless claims of 203K, suggests the greenback will keep capping gold’s immediate upside. However, the broader bullish trend for gold remains intact as long as the metal stays above its key moving averages. We should monitor the $4,700 resistance closely, as a clean breakout above this psychological barrier could quickly open the doors for a rapid run toward $4,900.
