Gold rose to a two-month peak near $4,450 after its biggest one-week gain since January in the first week of August, then retreated to finish the week broadly unchanged and around $4,400. Price action was shaped by softer US data and shifting expectations for a Federal Reserve move in September, while the Middle East conflict remained unresolved. Markets ignored official comments on Iran, but attention turned to disruptions in the Strait of Hormuz, where only eight vessels crossed on Tuesday versus an average of 120 before the war; separately, the EIA lifted its 2026 WTI forecast to $80.88 a barrel from $76.26.
US inflation prints kept the dollar under pressure: CPI eased to 3.4% year on year in July from 3.5%, with monthly CPI at 0.1% after a 0.4% fall, while core CPI rose 0.2%. Producer inflation slowed to 4.7% from 5.5%, and the CME FedWatch probability of a 25 bps September hike fell below 35% from about 45% a week earlier. Technically, daily RSI remains above 60, but gold has struggled to hold above the 100-day SMA near $4,390; resistance sits at $4,450 and $4,500-$4,505, while supports are $4,300-$4,295, $4,175-$4,150 and $4,000. Central bank buying was cited at 1,136 tonnes worth around $70bn in 2022.
Trading Strategy for Options and Key Support/Resistance Levels
We advise derivative traders to focus closely on the crucial $4,390 to $4,400 price range, which aligns with the 100-day Simple Moving Average. If gold can establish a firm foothold above this support level, we recommend buying short-term call options targeting the recent peak of $4,450. Conversely, a clear break below this threshold could offer a prime opportunity to buy puts targeting the next support zone near $4,300.
Structural Drivers and Market Outlook
This defensive posture makes sense because long-term demand remains incredibly strong, supported by global central banks which bought more than 1,030 tonnes of gold annually in recent years to diversify their reserves. Meanwhile, the ongoing conflict in the Middle East has slashed daily ship crossings in the Strait of Hormuz from an average of 120 down to just eight, threatening to push oil prices higher. Given these supply-chain threats and potential energy-driven inflation, we suggest using volatility-based strategies like straddles ahead of next week’s S&P Global PMI data.
We also need to navigate the shifting expectations for the Federal Reserve, especially with the market now pricing the chance of a September rate hike at under 35%. If the upcoming Fed minutes confirm that policymakers are hesitant to raise rates further, we will likely see Treasury yields drop, which historically acts as a massive tailwind for non-yielding gold. Traders can take advantage of this by positioning in bullish call spreads to capture a potential breakout toward the major $4,500 resistance level.
