Middle East Tensions Drive Energy Move
Middle East tensions added to the move in energy markets after reports that the Pentagon sent more troops to the region. WTI crude rose nearly 4% to $98.29 per barrel after attacks and retaliation linked to energy facilities across Iran and Gulf states, including Saudi Arabia, Qatar and Kuwait. Federal Reserve commentary pointed to a firmer stance on inflation, with Jerome Powell linking cuts to further disinflation progress. Christopher Waller cited rising inflation and said prolonged high oil prices could filter into core inflation, while Michelle Bowman said she had pencilled in three cuts this year. Technically, gold slipped below the 100-day SMA at $4,581, with $4,402 and the 200-day SMA at $4,066 as downside levels. A move above $4,600 would put the 50-day SMA at $4,961 back in view, while the RSI moved towards oversold. With gold breaking down decisively, the immediate strategy should be bearish. The combination of soaring oil prices, rising Treasury yields, and a hawkish Federal Reserve creates a powerful headwind for non-yielding assets. We should consider buying put options to capitalize on further downside, especially with momentum clearly favoring sellers. We saw a similar dynamic last year in 2025, when persistent inflation fears kept the Fed from cutting rates and weighed on gold for an entire quarter. History shows that when the market prices in rate hikes instead of cuts, gold’s path of least resistance is lower. Sustained oil prices above $90 a barrel in late 2024 also contributed to a stubborn rise in core inflation, a lesson the Fed clearly remembers now.Volatility And Key Levels To Watch
Volatility is now a trader’s primary focus, with the CBOE Gold Volatility Index (GVZ) having surged to over 25, a level not seen since the market jitters of early 2025. This indicates that options are becoming more expensive, but it also confirms the market is bracing for significant price swings. Buying puts allows us to profit from both the downward direction and this elevated sense of uncertainty. The key technical level to watch is the February cycle low of $4,402. A sustained break below this price would signal an acceleration of the downtrend and open the door to the $4,000 mark. We should be ready to add to bearish positions or initiate new ones with strike prices below $4,400, targeting that 200-day moving average. Given that the Relative Strength Index is approaching oversold territory, a short-term bounce is possible, but we would view it as an opportunity to sell. The put-to-call ratio on major gold ETFs has jumped to 1.5-to-1 this week, confirming that broad market sentiment is positioned for more weakness. Selling out-of-the-money call spreads above the $4,900 resistance level could be an effective way to generate income while maintaining a bearish outlook. Create your live VT Markets account and start trading now.
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