Gold rebounded towards USD 4,200 per troy ounce, recovering about USD 200 over two days and tracking its first weekly gain in five weeks, after a steep second-quarter slide. The metal fell 14% in Q2, its sharpest quarterly drop in 13 years, and was down slightly more than 7% in the first half. The move higher followed weaker US labour data and softer expectations for interest-rate increases, although the upswing had begun before the data release.<\/p>\n\n
Commerzbank\u2019s Carsten Fritsch characterised the rebound as corrective after an earlier decline that outpaced what could be accounted for by shifting rate expectations alone. He also observed that moves below USD 4,000 have tended to be brief, pointing to a possible bottoming process. Separately, the publisher said the article was produced with an artificial intelligence tool and reviewed by an editor.<\/p>\n\n
We are seeing gold recover towards $4,200 an ounce, a welcome rebound after a brutal second quarter. This move appears to be a correction following an exaggerated sell-off, not necessarily the start of a new bull run. The catalyst was the recent June jobs report, which showed Non-Farm Payrolls adding only 150,000 jobs against an expectation of 220,000.<\/p>\n\n
This weaker labor data has directly impacted interest rate expectations for the coming weeks. According to the CME FedWatch Tool, the market-implied probability of a rate hike at the Fed’s July meeting has now fallen from over 75% to just 40%. As long as expectations for aggressive rate hikes remain muted, we see limited downside for gold.<\/p>\n\n
From our perspective, the repeated and short-lived dips below the $4,000 mark suggest a solid floor is forming. This level has attracted strong buying interest, indicating the market is in a bottoming process. We do not anticipate further significant price declines unless new data forces the Federal Reserve to become more hawkish again.<\/p>\n\n
The 14% quarterly drop was the worst since the second quarter of 2013, which was also driven by fears of a shift in Fed policy. Just as back then, the preceding price fall was steeper than interest rate moves alone could justify. This suggests that much of the panic selling is now behind us.<\/p>\n\n
Given this, we feel that selling volatility could be a prudent strategy. With the price stabilizing, implied volatility in gold options, which was elevated during the sell-off, will likely decline. We are considering selling cash-secured puts with strike prices below the $4,000 support level for August expiry to collect premium.<\/p>\n\n
For those wanting to position for a modest recovery, defined-risk strategies like bull call spreads are attractive. One could consider buying a $4,150 call and simultaneously selling a $4,300 call for the August monthly expiration. This approach would profit from a slow grind higher while capping both potential profit and risk.<\/p>\n\n\n\n