Gold rose 0.58% with XAU\/USD nearing $4,070, helped by easing US Treasury yields after Washington paused attacks on Tehran and President Donald Trump indicated talks could resume. The move came even as the US Dollar steadied, as measured by the DXY, and as US equities softened following reports that a Chinese state-backed firm is producing chipmaking machines. Durable Goods Orders for June improved but missed forecasts, keeping attention on the Federal Reserve\u2019s decision on Wednesday; money markets, using Prime Terminal data, implied a 60% chance of no change and a 40% chance of a 25-basis-point hike. The US 10-year T-note yield fell 3.5 bps to 4.645%.<\/p>\n\n
Oil slid 6% to a one-week low after the US and Iran paused strikes following two weeks of attacks, raising hopes of de-escalation and resumed shipping through the Strait of Hormuz. In physical demand, China\u2019s net gold imports via Hong Kong more than doubled year-on-year in June, though they were down by over 5% from May. Technically, resistance sits at $4,100, then $4,165, $4,202 and the 50-day SMA at $4,221, while support is flagged at $4,022, $4,000 and $3,959; failure near $4,070 could pull prices back towards $4,050.<\/p>\n\n
We suggest derivative traders closely watch the 10-year US Treasury yield, which has recently slipped to 4.645% and historically shares a strong negative correlation with gold. With bullion hovering near $4,070, this drop in yields provides a solid floor for the precious metal in the immediate term. We recommend positioning for short-term upside if yields continue to slide below the key 4.5% psychological level.<\/p>\n\n
The upcoming Federal Reserve meeting presents a major volatility catalyst, with money markets pricing in a 60% chance of a rate pause and a 40% chance of a 25-basis-point hike. To exploit this pricing gap, we favor using long straddle option strategies to profit from a sharp breakout in either direction. Historically, gold prices experience average weekly swings of over 3% surrounding unexpected Fed policy shifts.<\/p>\n\n
Beyond the Fed, the upcoming release of Q2 GDP and the Core PCE inflation index will dictate the next mid-term trend. Stronger-than-expected inflation data could quickly push gold down toward the $4,000 support level as the US Dollar strengthens. We advise setting tight stop-losses on long positions or buying protective put options to hedge against a potential drop toward the $3,959 level. <\/p>\n\n
The temporary de-escalation between the US and Iran has already dragged crude oil prices down by 6%, easing immediate safe-haven demand. However, we must note that global central bank buying remains highly supportive, with China’s year-over-year gold imports doubling in recent data. We believe this strong physical demand will limit deep pullbacks, making limit-buy orders near the $4,022 support area an attractive entry point for long-term call options.<\/p>\n\n\n\n