Gold rebounded on Thursday after dipping below $4,300 to a near four-week low, trading around $4,488 and up 2.30% as the US Dollar eased and US Treasury yields fell. The move followed an increase in Initial Jobless Claims to 206K for the week ending August 29, compared with a 205K forecast and 204K previously. The US Dollar Index (DXY) hovered near 99.00, close to a one-week low, after touching 99.86 on Wednesday, its highest since August 14. The 10-year US Treasury yield slipped to about 4.74% for a second day after hitting 4.81%, the highest level since October 2023, while markets weighed the implications of higher oil prices linked to the war in the Middle East.<\/p>\n
Rate expectations remained in focus ahead of the August ISM Services PMI on Thursday and Friday\u2019s Nonfarm Payrolls (NFP). CME FedWatch showed traders pricing roughly a 60% chance of a rate rise at the September 15-16 meeting. On charts, XAU\/USD stayed above the 50-day and 100-day Simple Moving Averages (SMAs), with the Relative Strength Index (RSI) at 55 and the MACD still below zero. Resistance levels were cited at $4,500, $4,533 and $4,700, with support at $4,400, $4,357, $4,231 and $4,000. Central banks added 1,136 tonnes of gold worth about $70bn in 2022, according to the World Gold Council.<\/p>\n
We recommend that derivative traders adopt a cautious, range-bound strategy for gold options in the coming weeks. With the CME FedWatch Tool pricing in a 60% chance of a Federal Reserve rate hike on September 15-16, macro volatility is highly likely to spike. To capitalize on this, we should look at short-term iron condors to collect premium as gold consolidates near the critical $4,500 level.<\/p>\n
On the technical side, we see strong floor support at the 100-day Simple Moving Average of $4,357, while immediate resistance looms at $4,500. A sudden spike in the 10-year US Treasury yield back toward its recent high of 4.81% could easily push gold back below $4,400. To manage this risk, we advise purchasing protective puts or utilizing tight stop-loss orders on active long futures contracts.<\/p>\n
We must also watch the Japanese Yen’s strength, as its recent rally has pulled the US Dollar Index down to the 99.00 support level. Historically, a sustained decline in the greenback provides a strong tailwind for precious metals, even in high-interest-rate environments. Implementing bull-call spreads expiring in late September will allow us to capture potential upside breakout moves while strictly limiting our downside risk.<\/p>\n\n\n\n