Gold eased from session highs on Monday but held its bullish opening gap, struggling near $4,100 after rebounding from around $4,025 last week. Prices rose more than 1% at one point as the US Dollar and US Treasury yields softened, while a two-night pause in strikes between the US and Iran reduced demand for havens. Oil fell 5%, which helped cool inflation concerns and in turn tempered expectations for near-term Federal Reserve tightening.<\/p>\n
Traders stayed cautious ahead of the Fed meeting starting Tuesday, with a decision due on Wednesday, and as they weighed whether the lull since Friday evening\u2014following nearly two weeks of strikes\u2014will hold. Markets price roughly a 33% chance of a Fed rate hike, up from 12% 10 days ago, according to CME Group\u2019s FedWatch Tool. On the daily chart, XAU\/USD was at $4,090.11, sitting above the 21-day SMA at $4,069.60 but below the 50-day SMA near $4,221.95; the 100-day and 200-day SMAs around $4,469.47 and $4,493.66 add overhead pressure. The RSI (14) is near 48, and a Bear Cross was confirmed on July 22.<\/p>\n
As we watch gold hover around $4,090 ahead of this week’s crucial Federal Reserve decision, we advise derivative traders to prepare for heightened volatility. The market is currently pricing in a 33% chance of a rate hike, a sharp jump from just 12% ten days ago. To navigate this, we should consider using short-term option straddles to capitalize on the inevitable price swing.<\/p>\n
While the brief pause in US-Iran tensions has cooled oil prices by 5%, geopolitical risk remains highly unpredictable. Historically, major geopolitical shocks have caused gold to spike by 3% to 5% in a single session, much like the safe-haven rallies seen during previous Middle East conflicts. We recommend keeping a close eye on crude oil futures, as any sudden rebound there will likely drag gold higher with it.<\/p>\n
Looking at the charts, we cannot ignore the “Bear Cross” that was confirmed on July 22 when the 100-day moving average fell below the 200-day average. This indicator historically signals longer-term downward momentum, suggesting that any rallies toward the 50-day moving average of $4,222 might be short-lived. We suggest scaling into limited-risk bear put spreads to profit from this technical weakness.<\/p>\n
On the downside, a drop below the key 21-day moving average of $4,069 could trigger a wave of automated selling. If the Fed surprises the market with a rate hike on Wednesday, we expect this support level to break quickly. Traders should prepare for this scenario by setting stop-loss orders just below the $4,069 mark.<\/p>\n\n\n\n