Gold rebounded on Thursday after dipping below $4,300 to a near four-week low, trading around $4,488 and up 2.30% as the US Dollar eased and US Treasury yields fell. The move followed an increase in Initial Jobless Claims to 206K for the week ending August 29, compared with a 205K forecast and 204K previously. The US Dollar Index (DXY) hovered near 99.00, close to a one-week low, after touching 99.86 on Wednesday, its highest since August 14. The 10-year US Treasury yield slipped to about 4.74% for a second day after hitting 4.81%, the highest level since October 2023, while markets weighed the implications of higher oil prices linked to the war in the Middle East.
Rate expectations remained in focus ahead of the August ISM Services PMI on Thursday and Friday’s Nonfarm Payrolls (NFP). CME FedWatch showed traders pricing roughly a 60% chance of a rate rise at the September 15-16 meeting. On charts, XAU/USD stayed above the 50-day and 100-day Simple Moving Averages (SMAs), with the Relative Strength Index (RSI) at 55 and the MACD still below zero. Resistance levels were cited at $4,500, $4,533 and $4,700, with support at $4,400, $4,357, $4,231 and $4,000. Central banks added 1,136 tonnes of gold worth about $70bn in 2022, according to the World Gold Council.
Derivatives Strategy and Market Outlook
We recommend that derivative traders adopt a cautious, range-bound strategy for gold options in the coming weeks. With the CME FedWatch Tool pricing in a 60% chance of a Federal Reserve rate hike on September 15-16, macro volatility is highly likely to spike. To capitalize on this, we should look at short-term iron condors to collect premium as gold consolidates near the critical $4,500 level.
Technical Levels, Risk Management, and Currency Correlations
On the technical side, we see strong floor support at the 100-day Simple Moving Average of $4,357, while immediate resistance looms at $4,500. A sudden spike in the 10-year US Treasury yield back toward its recent high of 4.81% could easily push gold back below $4,400. To manage this risk, we advise purchasing protective puts or utilizing tight stop-loss orders on active long futures contracts.
We must also watch the Japanese Yen’s strength, as its recent rally has pulled the US Dollar Index down to the 99.00 support level. Historically, a sustained decline in the greenback provides a strong tailwind for precious metals, even in high-interest-rate environments. Implementing bull-call spreads expiring in late September will allow us to capture potential upside breakout moves while strictly limiting our downside risk.
