Gold rose on Friday, with XAU\/USD trading around $4,170, up about 1.16% on the day, as weaker US Nonfarm Payrolls data weighed on the US Dollar and pushed out expectations for the next Federal Reserve move. The Dollar index (DXY) hovered near 100.76, close to two-week lows, after the US added 57K jobs in June versus a 110K consensus. Markets shifted pricing for a rate increase from September to December; CME FedWatch showed the September hike probability falling to 53% from 63%, while December odds were 76.8%. The repricing helped gold rebound from a seven-month low of $3,949 hit on Tuesday, setting it up for a first weekly gain in five weeks.<\/p>\n
Gold has held above $4,000 after a near-28% drop from its January peak near $5,600, and the macro backdrop remains in focus as oil prices retreat from US-Iran war highs and policy stays restrictive until inflation trends toward the Fed\u2019s 2% target. Official-sector demand remains a support: World Gold Council data show central banks added a net 41 tonnes in May, and its Central Bank Gold Reserves Survey 2026 found 89% expect global reserves to rise over the next 12 months, while 45% plan to increase their own holdings. Technically, XAU\/USD is retesting the 20-day SMA near $4,156, with the Bollinger upper band around $4,371 and the lower band near $3,942; RSI is around 47 and MACD remains in positive territory.<\/p>\n
Given the weak June jobs report, we see an immediate opportunity for gold to continue its rebound. The market pushing back expectations for a Federal Reserve rate hike weakens the US Dollar, which directly helps gold prices. We should consider short-term bullish strategies to capitalize on this shift in sentiment.<\/p>\n
For the next couple of weeks, we are looking at buying call options with strike prices approaching the $4,371 resistance level. The key support to watch is the 20-day moving average around $4,156. As long as gold holds above this level, the path of least resistance is upward.<\/p>\n
This short-term strength is reinforced by very strong underlying demand from official institutions. In the first quarter of this year, central banks added a massive 290 tonnes to their reserves, marking the strongest start to a year on record. This consistent buying provides a solid floor under the market and gives us confidence to buy on dips.<\/p>\n
However, we must remain cautious about the medium term, as a Fed rate hike is only delayed, not canceled. We remember how in 2023, the market repeatedly priced in Fed pivots that failed to materialize for months, punishing those who were positioned too dovishly. The probability of a December hike is still over 75%, which will cap gold’s rally as that date gets closer.<\/p>\n
The drop in oil prices is helping reduce headline inflation, but the Fed’s primary concern is core inflation. Even with energy prices falling, core PCE inflation remains stubbornly high, last reported at 2.9%, well above the 2% target. This makes it very unlikely the Fed will signal a clear dovish turn anytime soon.<\/p>\n
Therefore, our strategy will be to use options to define our risk on bullish trades. We can look at buying call spreads, which would profit from a move toward $4,371 but also protect us if the rally fades. This allows us to participate in the current upswing while acknowledging that significant long-term headwinds remain in place.<\/p>\n\n\n\n