Australia’s CFTC AUD net positions decreased, moving from -51.2K to -59.6K. The shift indicates a further decline in the net positioning of the Australian Dollar against other major currencies.
The United States’ Bureau of Economic Analysis will release the Personal Consumption Expenditures Price Index data for August. Expectations are that the core index, which excludes food and energy, will increase by 0.2% month-over-month.
Gold Prices Nearing Highs
Gold prices are approaching their recent highs, nearing $3,800 per troy ounce. This increase is driven by the weakening US dollar, lower yields, and potential further rate cuts by the Federal Reserve.
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Market Dynamics and Strategy
We are seeing net short positions on the Australian dollar deepen significantly, moving from $-51.2K to $-59.6K. This growing bearishness suggests traders expect the Aussie to weaken, likely due to recent Australian inflation data for August 2025 coming in soft at 3.1%, giving the Reserve Bank of Australia reason to consider rate cuts. Derivative traders could look at buying AUD/USD put options to position for further downside.
The focus for this coming Friday is the US Core PCE inflation report, where the market expects a mild 0.2% monthly increase. A number at or below this forecast would validate the view that the Federal Reserve has inflation under control, paving the way for more interest rate cuts and continued US dollar weakness. We saw a similar dynamic back in late 2023, when soft inflation prints consistently sparked risk-on rallies.
Gold’s climb towards $3,800 an ounce is being driven by this exact expectation of Fed easing, which is pushing down US Treasury yields and the dollar. This rally is part of a longer-term trend that has been in place since gold broke through the key $2,100 resistance level in early 2024. Traders who are bullish on this trend could use call options on gold ETFs to gain exposure with defined risk.
The key takeaway is a divergence between a weak Australian outlook and a strong case for precious metals, all centered on a potentially falling US dollar. A strategy could involve being long gold futures while being short AUD/USD futures, but all positions face risk from the PCE data. An inflation reading that is higher than expected would challenge the current market narrative and could cause a rapid unwind of these trades.
