Gold rose nearly 2% on Friday and climbed back above $5,000 after a softer US inflation report. It had slipped to around $4,950 before buyers stepped in and pushed prices higher.
US CPI for January came in at 2.4% year on year. That was below the 2.5% estimate and down from 2.7% in December. Core CPI was 2.5% year on year, matching forecasts and down from 2.6%.
Gold Reclaims Key Level
Other US data this week was strong. Nonfarm Payrolls showed more than 130K jobs added in January, and the Unemployment Rate fell to 4.3%.
Money markets now price a 55% chance of a June rate cut, with a 25 basis point move. Recent CPI readings were 3.0% in September, 2.7% in November and December, and 2.4% in January.
US Treasury yields fell. The 10-year yield dropped almost 3.5 basis points on the day and 14 bps on the week, to 4.06%. The US Dollar Index was on track for a 0.85% weekly decline and traded at 96.84, down 0.07% on the day.
Next week brings Durable Goods Orders, housing data, Fed comments, FOMC Minutes, Initial Jobless Claims, a second GDP estimate for Q4 2025, and core PCE. Key technical levels include resistance at $5,100 and $5,200, and support at $4,971, $4,900, $4,800, and $4,618.
Derivatives Strategy And Positioning
With gold back above the key $5,000 level, we view this as a clear move driven by softer inflation. The rally is supported by renewed bets that the Federal Reserve may cut rates by June. We should position for further gains as long as this story remains in place.
Derivative traders may consider buying call options with strike prices near the $5,100 resistance level. Implied volatility has likely risen after the sharp move, but strong momentum suggests there may still be room to the upside. During the late-2023 gold rally, when talk of a Fed pivot first picked up, we saw similar bursts of strong and persistent buying.
At the same time, the solid jobs report and still-firm core inflation could give the Fed a reason to wait. To hedge against a pullback, traders could buy put options with strike prices below the 20-day moving average, near $4,950, to help protect gains. This can act as a buffer if upcoming data shifts sentiment.
The main focus in the coming weeks is the Fed’s preferred inflation measure: core PCE. This report could confirm the disinflation signal from CPI, or it could challenge it, which may lead to large price swings. Traders should plan for higher volatility around this release, including strategies that can benefit from a big move in either direction.
We are also watching the US 10-year yield, now at 4.06%. Historically, a steady decline in real yields supports non-yielding assets like gold. If yields keep falling and the US Dollar Index stays below 97.00, it would strengthen the bullish case for gold derivatives.
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