Gold retreated more than 1.80% and slipped back below $4,000, with XAU/USD trading at $3,994 as US–Iran tensions raised the risk of Oil supply disruption and lifted inflation concerns. The US Dollar strengthened, with the US Dollar Index (DXY) up about 0.24% at 100.74, still short of 101.00. West Texas Intermediate (WTI) was modestly lower on the session but remained up over 13% in July, reinforcing expectations that the Federal Reserve (Fed) could tighten policy later in the year and helping push the US 10-year T-note up nearly 3 basis points to 4.577%.
US data added to the firmer tone. Retail Sales rose 0.2% month-on-month in June versus May’s 1% gain, while the Control Group measure eased from 0.8% to 0.5%; Initial Jobless Claims for the week ending 11 July printed at 208K against forecasts of 217K. Money markets priced a 73% probability of no change at the July meeting, yet showed 57% odds of an October hike. Technically, gold hit a 13-day low of $3,974, with support at $3,941, then $3,900 and $3,886, while resistance sits at $4,125–$4,175, the 50-day SMA at $4,305 and the 200-day SMA at $4,495 before $4,500. Central banks added 1,136 tonnes, valued around $70 billion, in 2022.
Technical Breakdown and Trading Strategy
With gold breaking below the crucial $4,000 support level to trade at $3,994, we should prepare for further downside momentum in the coming weeks. The technical breakdown past the 13-day low of $3,974 suggests that short-selling or buying put options is a viable step as the price eyes the year-to-date low of $3,941. Historically, when gold breaks major psychological barriers, sell-offs tend to accelerate, meaning we could see a quick slide toward the $3,900 mark.
Portfolio Adjustments and Risk Management
We must also adjust our portfolios to account for the rising US Dollar and surging energy costs. Since West Texas Intermediate (WTI) crude oil has surged over 13% so far this July, buying call options on energy assets or the US Dollar Index (DXY) offers a strong hedge. Historically, rapid energy price spikes fuel broader inflation fears, which naturally drives capital into the yield-bearing greenback and away from non-yielding gold.
With the market pricing in a 57% chance of a Federal Reserve rate hike in October, we need to position for higher-for-longer interest rates. Treasury yields are already drifting up, with the 10-year note hitting 4.577%, which heavily pressures precious metals. We recommend trading short-term interest rate futures or selling gold call options to capitalize on this hawkish shift from Fed officials.
While we maintain a bearish outlook, we must set strict stop-losses and monitor key resistance levels for any signs of a trend reversal. A breakout above the downslope trendline between $4,125 and $4,175 would invalidate our short bias and signal a potential rally toward the 50-day moving average of $4,305. Until those overhead levels are breached, we remain focused on capitalizing on the current downward slide.
