Gold (XAU/USD) pushed above $4,650 to its highest level since mid-May, extending last week’s move beyond the 200-day SMA. Demand was supported as near-term US Federal Reserve tightening expectations eased after softer July US inflation data, while US Treasury yields stayed subdued and the USD hovered near a three-month low. Markets now lean towards a hold at the 15–16 September FOMC meeting, and the US Department of the Treasury said it will at least double buyback operations for long-dated government debt from September, with buybacks potentially exceeding $4bn per issue.
Even so, pricing still implies over a 70% chance of at least one Fed rate rise by year-end. Attention turns to Wednesday’s US PCE Price Index and Fed Chair Kevin Warsh’s Jackson Hole Symposium speech for policy cues. Geopolitical risk also remains in focus: US Treasury Secretary Scott Bessent is set to unveil new Iran sanctions, while Iran warned it could halt oil exports through the Strait of Hormuz and the Persian Gulf. Technically, RSI is at 71.77 and MACD remains positive; resistance sits near $4,684.43 and $4,891.38, with support at $4,521.97, $4,516.88, $4,407.86 and $4,293.75.
Technical Momentum and Trading Strategies
We recommend that derivative traders adopt a cautiously optimistic stance on gold as it consolidates its breakout above the key $4,615-$4,620 level. While the technical momentum is strongly bullish, the Relative Strength Index (RSI) sitting at 71.77 suggests we are in overbought territory and could face a short-term pullback. To navigate this, we should consider using bull call spreads to target the next major resistance level at $4,684.43 while limiting our upfront premium cost.
Macroeconomic Events, Geopolitics, and Risk Management
The growing geopolitical tension between the US and Iran over the Strait of Hormuz, which historically handles about 20% of global petroleum liquids consumption, introduces massive volatility. If exports are disrupted, oil prices could spike, reviving global inflation fears and suddenly bolstering the US Dollar as a safe haven. To hedge against this sudden shift, we should buy out-of-the-money straddles on both gold and crude oil options to profit from sharp, unexpected price swings.
We must also prepare for the upcoming US PCE inflation data on Wednesday and Kevin Warsh’s highly anticipated Jackson Hole speech. Historically, gold prices exhibit an average weekly volatility spike of 2% to 3% during major Fed policy shifts, meaning we should avoid holding uncovered short options. Instead, we can lock in profits on existing long positions or buy protective puts to safeguard our gains against a hawkish surprise.
If we see a downward correction driven by profit-taking or a stronger dollar, we should view the $4,516 to $4,521 range as a prime entry zone for new long positions. This area is strongly supported by the 200-day Simple Moving Average, which has historically acted as a reliable floor during major bull markets. Securing long futures contracts at these levels with tight stop-losses below $4,407 will optimize our risk-reward ratio in the coming weeks.
