Gold prices have risen above the recent range of $3,760 to $3,720, reaching close to $3,780. This increase comes as the US Dollar weakens, partly due to stable inflation data. Gold is approaching its record high of $3,791 and is on track for a sixth consecutive weekly gain, driven by trade tensions and geopolitical risks. The core PCE Price Index increased by 0.2% month-over-month, aligning with expectations, and it remains steady annually at 2.9%. Meanwhile, the headline PCE Price Index rose by 0.3% in August, which was also as anticipated, up from 0.2% in July. The annual rate jumped to 2.7% from 2.6%.

Fed Policy and Economic Indicators

Federal Reserve policymakers are cautious about further easing. They recently cut interest rates by 25 basis points, but recent US economic data has been surprisingly strong. GDP and Weekly Jobless Claims showed better results than expected, though consumer sentiment has slightly declined. New tariffs from President Trump and a Q2 GDP revision to a 3.8% growth rate have lowered the chances of another Fed rate cut. Technically, XAU/USD has moved beyond its consolidation phase and is testing resistance near $3,791, with immediate support at $3,760. Gold, influenced by geopolitical factors and the US Dollar, serves as a safe asset and a hedge against inflation. Gold is currently testing its all-time high of $3,791, trading around $3,780. The recent rise occurred as the US Dollar eased after a stable inflation report. This marks the sixth week of gains, indicating strong momentum for gold. The Federal Reserve’s cautious stance is understandable given recent trends. The current core inflation rate of 2.9% is better than the previous 4-5% levels we dealt with in 2023. This context helps explain the Fed’s hesitation to cut rates sharply, creating a tense environment for traders.

Trade Tensions and Market Strategies

Renewed trade tensions and new tariffs are boosting gold’s appeal as a safe haven. The mix of strong GDP data and weaker consumer sentiment suggests ongoing market volatility. High volatility often increases option premiums, an important factor for trading strategies. Additionally, we should consider the long-term trend of central banks buying gold. In 2022, they purchased a record 1,136 tonnes, a trend that’s ongoing as countries look to diversify their reserves. This consistent institutional demand supports prices during any downturns. With bullish momentum, traders might consider call options to take advantage of further gains if gold surpasses its $3,791 record. Buying calls with strike prices at or above $3,800 could be a popular way to profit from a potential rally, providing a defined risk compared to leveraged futures positions. On the other hand, the support level at $3,760 is crucial now. Traders confident this level will hold may look into selling put options below it, like at $3,750 or $3,740. This strategy benefits from time decay and the expectation that gold will not decline sharply in the short term. Create your live VT Markets account and start trading now.

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