Gold traded briefly above $4,680 per troy ounce on Monday, its highest level since mid-May, with XAU/USD last cited at $4,657 as the US Dollar weakened against most major peers. Price action followed the collapse of US-Canada trade talks, after President Donald Trump threatened tariffs on Canada, with a focus on steel and the automotive sector. Separately, US Treasury Secretary Scott Bessent is due to outline sanctions targeting countries or companies that trade with Iran, after Trump said the next step in the Middle East conflict would be to choke Iran financially.
Technically, the four-hour chart keeps a bullish bias, with gold holding above the 20-period SMA at $4,573.09 and also above the 100- and 200-period SMAs at $4,350.49 and $4,204.36; RSI is rising at 76 while Momentum remains above its midline despite a modest dip. On the daily timeframe, the 100-day and 200-day SMAs stand at $4,379.83 and $4,516.97, and the 20-day SMA is at $4,307.69. Support is flagged at $4,573.09 then $4,500, with resistance at $4,700, then around $4,730, and $4,800 beyond that.
Trading Outlook and Strategy
With gold spot prices hovering around the historic $4,657 mark, we believe derivative traders should position themselves to capture the immediate upward momentum toward the $4,700 resistance level. Given the strong daily and four-hour moving averages supporting this rally, utilizing long call options or bull call spreads provides an excellent risk-reward ratio for the coming weeks. We should look to establish long positions on any minor pullbacks toward the immediate support level of $4,573.
Historical Backdrop and Technical Indicators
This strategy is backed by historical data showing that gold typically thrives during trade disputes; during the 2018–2019 tariff escalations, gold prices surged by over 25% as investors fled to safety. Furthermore, the geopolitical uncertainty surrounding the new financial sanctions on Iran historically drives safe-haven inflows, similar to the 15% gold rally observed during Middle East tensions in early 2024. Derivative traders can capitalize on this volatility by trading short-term gold futures with tight stop-losses just below the $4,500 psychological floor.
The Relative Strength Index currently sits at 76, indicating strong overbought momentum that often precedes a final, powerful leg up before any technical exhaustion sets in. We recommend monitoring the implied volatility of gold options, which tends to spike during these high-stakes diplomatic standoffs, making premium-buying strategies highly lucrative if the breakout past $4,700 occurs. If the price manages to clear the $4,730 barrier, we expect a rapid run toward $4,800, making out-of-the-money calls an attractive high-leverage play.
