Gold edged higher at the start of the week, with XAU/USD at $4,352, up 0.50%, after touching a daily low of $4,316. Delays to reopening the Strait of Hormuz, after Iran set out demands for the US, lent support, though gains were capped by a firmer dollar and a focus on forthcoming US inflation data. The US Dollar Index was up 0.14% at 99.75 as markets assessed US and Japanese FX intervention, while last week’s Nonfarm Payrolls showed a 23K fall in jobs versus forecasts for an 80K rise, alongside downward revisions to May and June; Richmond Fed President Thomas Barkin described conditions as low-hiring, low-firing.
Attention now turns to July CPI, seen easing to 3.4% year-on-year from 3.5%, with core CPI projected at 2.5% from 2.6%. Producer prices are also expected to cool, while initial jobless claims for the week ending 8 August are forecast at 201K versus 199K. Money markets price 22 basis points of Federal Reserve tightening by late 2026, up from 17, according to Prime Terminal data. Oil’s rise added pressure, with WTI up nearly 6% to $81.54 a barrel. Technically, gold remains below the 100-day SMA at $4,389; resistance levels include $4,400 and the 200-day SMA at $4,498, with supports at $4,202, the 50-day SMA at $4,150, and $4,100. Central banks added 1,136 tonnes, worth around $70 billion, to reserves in 2022, World Gold Council data showed.
Trading Strategy and Market Impact of Geopolitical Events
We recommend that derivative traders closely watch the $4,389 level, which is the 100-day Simple Moving Average for gold. If gold breaks above this key point, we should consider buying call options targeting the $4,400 and $4,500 levels. However, because current momentum is bullish but still capped, we must prepare for sudden pullbacks before a clean breakout occurs.
Geopolitical tensions are heavily impacting the market, especially with the Strait of Hormuz remaining closed due to US and Iran disputes. Since this vital waterway carries about 20% of the world’s liquid petroleum, any prolonged delays will likely keep crude oil prices trading above $80 per barrel. We suggest utilizing bull call spreads on crude oil to capitalize on this supply disruption while hedging our gold positions against sudden market shifts.
US Economic Data Outlook and Long-Term Gold Demand
The upcoming US inflation data is the next major catalyst that we must prepare for this week. If the Consumer Price Index drops to the expected 3.4%, it could weaken the US Dollar and push gold prices past its current resistance. Conversely, if inflation remains sticky, the Federal Reserve may delay rate cuts, which historically pressures gold and boosts the greenback.
The recent weak payroll data, which showed the US economy losing 23,000 jobs, suggests the labor market is cooling down. Weekly jobless claims are expected to rise to 201,000, which we believe will increase pressure on the Fed to ease monetary policy. Traders can position for this by trading short-term interest rate options to capture shifts in Fed rate expectations.
We must also remember that strong physical demand provides a long-term floor for gold prices. Historical data from the World Gold Council shows central banks purchased over 1,037 tonnes of gold in a single year to diversify away from the US dollar. This continuous buying means any downward corrections toward the $4,202 support level should be viewed as a discount buying opportunity for long-term call options.
