Gold extended losses on Wednesday as rising US Treasury yields and firmer oil prices weighed on the non-yielding metal. In Asian trade, the US 10-year yield touched 4.81%, described as the highest level since November 2023, while market pricing for a Federal Reserve move also shifted: an almost two-thirds probability of a rate rise at the FOMC meeting on 16 September was cited, and the CME FedWatch tool put the chance at 67%. Separately, WTI climbed to a five-week high of $90.78, with renewed concerns over disruption around the Strait of Hormuz after US strikes on Iranian targets; eight missiles were reported launched by Tehran and intercepted at a US base in Jordan.
Attention was also on upcoming US data, with ADP Employment Change for August due at 12:15 GMT. Expectations were for 48K private-sector jobs, compared with 44K in July. In spot trading, XAU/USD was at $4,295.45, staying below the 20-day EMA near $4,409.75, while the RSI (14) sat around 44. Separately, the World Gold Council said central banks added 1,136 tonnes of gold worth about $70 billion in 2022.
Gold’s Technical and Macro Headwinds
We are seeing strong downward pressure on gold as it currently trades at $4,295.45, well below its 20-day Exponential Moving Average of $4,409.75. With the 10-year US Treasury yield surging to an almost three-year high of 4.81%, the appeal of holding this non-yielding metal has dropped significantly. To make matters worse for gold bulls, expectations for a Federal Reserve rate hike at the upcoming September 16 meeting have jumped to 67%.
Given this bearish technical alignment and rising yields, we should consider buying short-term put options on gold or executing bear put spreads. Historically, when 10-year yields stay elevated, gold prices tend to face sustained liquidations as institutional capital shifts to debt instruments. By utilizing put options with a target below the current price, we can profit from further slides while strictly capping our downside risk.
Derivative Strategies Amid Surging Oil and Rate Hike Bets
At the same time, we must watch the energy sector closely as WTI crude oil has broken past the $90-per-barrel mark amid escalating US-Iran tensions. Higher oil prices typically drive up global inflation expectations, which historically forces central banks to keep interest rates higher for longer. Derivative traders can capitalize on this energy spike by purchasing call options on WTI futures to hedge against broader market inflation.
With the next FOMC meeting only two weeks away, we recommend using Fed Funds futures to position for the anticipated interest rate hike. Recent CME FedWatch data shows a sharp rise in hawkish bets, which is historically followed by short-term bond market volatility. Trading these interest-rate derivatives now will allow us to capture yield movements before the central bank makes its official announcement on September 16.
