Gold extended its rally on Monday after US Treasury Secretary Scott Bessent said Washington had imposed sanctions on Iran-linked entities, pushing XAU/USD to a three-month high of $4,681 before easing to $4,631, up 0.62%. The move followed bullion’s break above the 200-day SMA at $4,516 last Friday, while the broader uptrend remains capped below the May 7 high at $4,764. US yields slipped as the news hit, with the 10-year Treasury yield down 3.5 basis points to 4.700%, while the Dollar strengthened, leaving DXY up 0.22% at 99.05 after reclaiming 99.00.
The Treasury said it sanctioned nearly 60 Iran-linked entities spanning the UAE, Hong Kong, China, Singapore, Switzerland and Europe, targeting sectors including digital assets, technology, gold, aviation and shipping, and aiming to curb funding for the IRGC. Haven positioning also showed up in fund flows, with the WGC reporting bullion ETF inflows of 46.7 million tons, valued at $6.4 billion, last week, the biggest weekly rise in 10 months. Technically, gold has recaptured $4,595 and is testing $4,600, with resistance at $4,700 then $4,764, and further levels at $4,800 and $5,000; downside markers include $4,516, $4,500 and the 100-day SMA at $4,379. Markets are also awaiting US growth, inflation and jobs data and Fed Chair Kevin Warsh’s Jackson Hole speech on Friday.
Geopolitical Risks and Strategic Positioning for Derivative Traders
We believe derivative traders should prepare for a sustained upward run in gold (XAU/USD) as geopolitical risks push prices past key resistance levels. After clearing the 200-day Simple Moving Average at $4,516, the metal reached a three-month high of $4,681 before settling near $4,631. This strong momentum suggests that bullish traders should look to establish long positions, targeting the next psychological resistance at $4,700.
The escalating tensions in the Middle East, fueled by the U.S. Treasury’s new “Operation Outcast” sanctions on Iran, are driving historic safe-haven demand. Last week alone, gold ETFs saw massive global inflows of $6.4 billion, marking the largest weekly increase in ten months. We recommend using bull call spreads to capitalize on this flight to safety while limiting downside risk in case of sudden market shifts.
Technical and Macroeconomic Factors Shaping Gold’s Outlook
Macroeconomic backdrops also favor long derivatives, as the U.S. 10-year Treasury yield recently slipped to 4.70%. Historically, falling yields reduce the opportunity cost of holding non-yielding bullion, which often triggers sharp rallies like the ones we saw during previous global monetary easing cycles. Traders should closely watch the upcoming Jackson Hole symposium on Friday, where Fed Chair Kevin Warsh’s speech could spark massive volatility across interest rate options.
From a technical standpoint, the Relative Strength Index (RSI) has crossed into overbought territory above 70, but we expect it could climb as high as 85 during this strong breakout. To manage risk, we suggest placing stop-losses just below the $4,516 support line while leaving upside targets open toward the May high of $4,764. Utilizing short-term call options will allow us to capture this momentum without tying up too much capital ahead of the high-impact economic data releases this week.
