Gold fell further after an intraday rejection at $4,100, retreating from the one-week high reached the prior session as the US Dollar regained ground following Wednesday’s post-FOMC dip. With US-Iran tensions stoking inflation concerns via oil, markets kept expectations for at least one Fed rate rise by year-end in play, which reduced demand for non-yielding bullion. The Fed held rates steady after a two-day meeting, though three policymakers dissented in favour of a 25-basis-point hike, while attention shifts to the Advance Q2 GDP release and the PCE Price Index for clues on the policy path.
Energy markets were driven by the US-Iran conflict, including strain around the Strait of Hormuz and Bab el-Mandeb, after US strikes followed surprise Iranian missile attacks on American forces in the Middle East on Tuesday. Reports also pointed to joint US-Saudi strikes against Iran-aligned militants in Iraq and to Yemen’s Iran-backed Houthis weighing fees on ships in the southern Red Sea. Technically, gold has traded in a month-long range after breaking below the 200-day SMA, with MACD turning positive but RSI near 48; resistance sits near $4,200 and the 200-day SMA at $4,490.80, while support is seen around $3,976–$4,000 for XAU/USD.
Derivative Trading Strategies Amid Geopolitical and Macroeconomic Forces
We are advising derivative traders to prepare for continued downward pressure on gold in the coming weeks as macroeconomic forces limit its upward potential. With Brent crude oil currently trading near $88 a barrel due to escalating US-Iran tensions, energy-driven inflation remains a persistent threat. This geopolitical friction is keeping the US dollar strong and making non-yielding assets like gold less attractive.
Following the Federal Reserve’s recent decision to hold rates steady, the market is still pricing in a 62% chance of another rate hike before the end of the year. This hawkish outlook is backed by the fact that three Fed policymakers dissented, actively pushing for an immediate 25-basis-point increase. We believe traders should focus on the upcoming PCE price index data to gauge how aggressively the Fed will act.
Technical Setup and Specific Trade Recommendations
From a technical perspective, gold remains in a bearish consolidation phase after failing to sustain its break above the $4,100 mark. The metal is trading well below its 200-day Simple Moving Average of $4,490.80, which acts as a major barrier for any long-term recovery. Meanwhile, the Relative Strength Index is hovering weak at 48, indicating that any short-term rallies will likely face heavy selling pressure near $4,200.
To capitalize on this setup, we recommend that derivative traders establish short positions or buy put options when gold rallies toward the $4,100 to $4,150 resistance zone. Selling out-of-the-money call options or utilizing bear call spreads can also generate steady income in this range-bound, bearish environment. We suggest setting tight stop-losses just above $4,200, while targeting a downward move toward the key support floor at $3,976.
Given the high risk of supply shocks in the Strait of Hormuz where daily oil flows historically exceed 20 million barrels, implied volatility in the options market is expected to spike. Traders can hedge their portfolios by purchasing long call options on crude oil futures alongside their short gold positions. This dual strategy allows us to capture gains from geopolitical escalations while protecting capital from sudden market reversals.
