Gold rebounded on Friday after sliding to a weekly low of $4,311, later trading around $4,372 as the US Dollar softened and expectations of a near-term Federal Reserve rate rise eased. The move left XAU/USD below Thursday’s two-month peak of $4,449. US data reinforced the cooling-growth narrative: July Retail Sales fell 0.6% month on month, versus forecasts for a 0.1% rise, after a 0.2% increase in June. Earlier releases also pointed to easing price pressures, as CPI and PPI moderated, while July NFP undershot expectations and prior months were revised down.
Front-end Treasury yields declined and the US Dollar Index stayed below 100, with markets paring a September hike and, per the CME FedWatch Tool, assigning about a 70% probability to unchanged policy then. Inflation remains above the Fed’s 2% target, and oil prices are elevated amid uncertainty over the reopening of the Strait of Hormuz, keeping longer-dated yields high and leaving scope for future tightening. Technically, gold is struggling to clear the 100-day SMA at $4,386, while the 20-day SMA at $4,173 offers support; RSI is near 62 and MACD is positive. Resistance sits up to the Bollinger upper band at $4,455, with downside markers at $4,000 and the lower band near $3,891.
Macro Drivers and Historical Context
We are seeing gold hover around $4,372 today, rebounding from its weekly low of $4,311 after weak US economic data cooled rate hike expectations. The recent 0.6% drop in July retail sales and a cooling labor market have pushed the US Dollar Index below the key 100 level. This macroeconomic shift has prompted traders to price in a 70% chance that the Federal Reserve will hold rates steady in September.
Historically, gold performs exceptionally well when real yields decline and the dollar weakens, similar to the massive bull runs seen during the inflationary shocks of the late 1970s and 2022. Today, with gold trading significantly higher than its historical 2024 average of around $2,300, the metal is proving to be the ultimate hedge against modern geopolitical risks like the ongoing Strait of Hormuz tensions. We believe this macro environment creates highly lucrative setups for derivative traders in the coming weeks.
Trading Setups and Risk Considerations
For traders looking at the long side, we should watch the immediate resistance level at the 100-day Simple Moving Average of $4,386. A decisive breakout above this level, extending toward the Bollinger upper band at $4,455, would signal a strong buy. In this scenario, we recommend buying out-of-the-money call options or entering long futures contracts to capture the upward momentum.
However, we must remain cautious as persistent inflation risks from high oil prices could still trigger future rate hikes and cap gold’s gains. If gold fails to clear the $4,386 barrier, we should prepare for a pullback toward the 20-day Simple Moving Average at $4,173. To trade this potential downside, we can utilize bear put spreads to protect capital while targeting the psychological $4,000 support level.
