Gold prices (XAU/USD) are on the rise, reaching nearly $3,360 during the European session. This increase comes as US Treasury yields drop 1.2% to about 4.26% due to heightened expectations for a Federal Reserve interest rate cut. The latest US Consumer Price Index (CPI) data shows tariffs have little impact, strengthening predictions for a rate cut in September. The CME FedWatch tool now suggests a 94% likelihood of a rate cut, up from 86% earlier this week.

Symmetrical Triangle Pattern

A weaker US Dollar is also lifting gold prices, which are fluctuating within a Symmetrical Triangle pattern. This pattern indicates possible volatility, with resistance levels at $3,500, $3,550, and $3,600, and support levels at $3,200 and $3,121. Gold has always been seen as a store of value and a safe haven for investors. Central banks, especially in emerging markets like China and India, have boosted their gold reserves, adding 1,136 tonnes in 2022. Gold prices often move in the opposite direction of the US Dollar and Treasuries. Prices rise when the Dollar weakens and fall when risk assets do well. Gold’s value is also swayed by geopolitical events, interest rates, and the strength of the US Dollar. As gold approaches $3,360, we have a clear opportunity driven by decreasing US Treasury yields. The market is largely anticipating a Federal Reserve rate cut in September, creating a favorable environment for non-yielding assets. Our focus should be on strategies benefiting from this expected monetary easing. With a 94% chance of a rate cut, it’s wise to prepare for more upside in gold. Buying call options with strike prices near the $3,500 resistance level could be a leveraged way to profit if a breakout occurs. This strategy positions us to gain if gold continues its rise in the upcoming weeks.

Bullish Outlook and Trading Strategies

This optimistic outlook is supported by recent economic data. Last week, the US Bureau of Labor Statistics reported nonfarm payrolls grew by only 145,000, below expectations. This suggests a slowing labor market, putting pressure on the Fed to make a move. Additionally, the World Gold Council’s Q2 2025 report confirmed that central banks have been active buyers, adding another 220 tonnes to global reserves. However, we must remain cautious about the Symmetrical Triangle pattern gold is trading in. This pattern often signals high volatility and significant price movement in either direction. Therefore, it’s wise to prepare for a major price swing. To trade this potential volatility, we could use a long straddle strategy, which involves buying both a call and put option at the same strike price and expiration date. This allows us to profit from large moves, regardless of whether gold climbs toward $3,600 or falls below support. This strategy directly plays off the triangle pattern that may resolve around the September Fed meeting. Historically, we saw a similar situation in summer 2019 when the Fed began cutting rates after a period of increases. Gold surged more than 15% in the months after that first rate cut, indicating that the start of a Fed easing cycle can significantly boost gold prices. To manage risk, we should keep an eye on key support levels at $3,200 and the crucial level at $3,121. A clear drop below these levels would indicate our bullish outlook may be incorrect, prompting us to exit our long positions. Allocating some capital to buy protective put options below these levels can offer valuable insurance against unexpected downturns. Create your live VT Markets account and start trading now.

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