Gold recently experienced an extended rally but has now stalled as traders focus on upcoming US inflation data. The US Producer Price Index (PPI) data will be released today, followed by the Consumer Price Index (CPI) report tomorrow, both of which precede the Federal Open Market Committee (FOMC) meeting next week. A 25 basis points rate cut is expected, but if inflation data shows a softer trend, the probability of a 50 basis points cut could increase, potentially boosting gold prices further.
Technical Analysis of Gold
Technical analysis of gold provides insights across different chart timeframes. On the daily chart, momentum has stalled, with the potential for buyers to find opportunities around the 3,400 level, while sellers may aim for a drop towards the 3,120 level. This pattern repeats on the 4-hour and 1-hour charts, with minor upward trendlines indicating bullish momentum. Buyers are expected to support these trendlines to push prices higher, while sellers will seek to break lower targets. Key upcoming financial reports include today’s US PPI report, tomorrow’s US CPI, and Jobless Claims figures, and Friday’s University of Michigan Consumer Sentiment report.
We see that gold’s record rally has stalled just above the $3,450 mark as we await key economic data. The focus is squarely on the upcoming US inflation reports, which will heavily influence the Federal Reserve’s policy decision next week. A soft number would reinforce the market’s expectation for easing, especially after last week’s weaker-than-expected Non-Farm Payrolls report showed only 150,000 jobs added in August 2025.
This creates a clear binary event for options traders in the coming days. A lower-than-expected CPI print tomorrow could push expectations for a 50 basis point cut, making call options on gold futures an attractive play for a quick upward move. Conversely, a surprisingly high inflation number would dampen hopes for aggressive cuts, likely strengthening the dollar and making put options a viable strategy to speculate on a correction.
Probability of Rate Cuts
Currently, fed funds futures are pricing in a 100% chance of a 25 basis point cut at next week’s FOMC meeting, with the probability of a larger 50 basis point cut now standing at about 35%. This is a sharp reversal from the aggressive hiking cycle we saw through 2023 and early 2024, which pushed the federal funds rate above 5%. We believe the dovish pivot is now firmly in place, fundamentally supporting gold.
For traders implementing these strategies, the technical levels provide clear risk-management points. A bullish position using call options finds support near the major trendline at the $3,400 level, which could be a potential entry point on any dip caused by initial market noise. A decisive break below this $3,400 mark would be a signal for bears, likely paving the way for a deeper correction towards the $3,120 support zone.
Even with short-term uncertainty, the broader trend for gold appears upward as long as the Fed continues its easing cycle. We expect real yields to continue falling, which has historically been a strong tailwind for gold prices since the post-pandemic inflation shock of the early 2020s. Therefore, using any hawkish-driven corrections to buy longer-dated call options could be a prudent strategy to capture the expected continuation of the uptrend.
