Gold’s value has risen for the fourth consecutive day, finding support around $3,350, thanks to a weaker US Dollar. After some early troubles in Europe, buyers pushed prices up from intraday lows near the 50-day Simple Moving Average. Currently, Gold (XAU/USD) trades at about $3,380, showing a 0.20% increase during US trading hours. Market focus is now on US tariffs, which may impact global market stability. Recent US PMI data showed mixed results, with the S&P Global Services PMI at 55.7, exceeding expectations, while the ISM Services PMI came in lower at 50.1. This suggests that the private sector remains resilient despite some setbacks. Following last week’s losses, markets have bounced back, driven by hopes for Federal Reserve interest rate cuts. The MSCI All-Country World Index and Nasdaq have risen along with other markets.

US Dollar Impact

The US Dollar has weakened due to lower US Treasury yields and disappointing economic data. Even with these challenges, bond yields remain close to recent lows, supporting Gold prices despite weak hiring and order data in the services sector. The US Dollar Index is fluctuating around 98.70. Total gold demand has increased, with investment demand rising, even as jewellery consumption has decreased. Central bank purchases have slowed slightly but remain strong, with expectations for significant annual acquisitions. Market sentiment is leaning towards interest rate cuts, driven by issues like geopolitical tensions and inflation worries, which boost Gold’s appeal. San Francisco Fed President Mary Daly noted uncertainty about potential rate cuts, despite softening economic indicators. Additionally, mixed US economic releases provide insights into consumption, services, and trade activities. Technical analysis suggests that Gold has faced resistance but may reach new highs if current momentum persists. Indicators like RSI and MACD show neutral positions with easing bearish pressure. Gold tends to move inversely with the US Dollar and other assets, serving as a hedge during unstable times. Price movements in Gold often respond to geopolitical events, interest rates, and Dollar strength, making it a safeguard against inflation and currency devaluation.

Investment Strategies

With the current upward trend, we see a good chance to position for higher gold prices in the coming weeks. The combination of a weaker US Dollar and expectations for Federal Reserve rate cuts creates a favorable environment. Strategies that benefit from a rise above the current $3,380 level should be considered. For a straightforward bullish approach, we are looking at buying call options with strike prices above $3,400. This allows us to benefit from price increases while limiting our initial risk to the premium we pay. Technical indicators suggest that the recent rally has more room to grow, with less bearish pressure. The case for Fed cuts is gaining strength, which historically supports gold prices. The latest July 2025 inflation report showed the Consumer Price Index cooling to 2.8%, giving the Fed more room to consider easing policies. Reflecting on the rate-cutting cycle that started in mid-2019, gold experienced a significant multi-month rally, a pattern we might see again. We should also explore selling out-of-the-money put options to collect premiums, using strike prices near the $3,350 support level. This strategy can be profitable if gold remains steady or rises, benefiting from price stability and time decay. It’s a safer way to express a bullish-to-neutral view on Gold. The weakness of the US Dollar looks to support our perspective. The US Dollar Index has dropped over 2.5% from its highs near 101.50 in May 2025. As long as US Treasury yields stay low and economic data is mixed, the Dollar seems likely to weaken further, which would directly benefit Gold. We need to stay alert for potential volatility from US tariff announcements or a more aggressive stance from the Federal Reserve. The CBOE Volatility Index (VIX) is around 19, indicating underlying market concerns that could either enhance Gold’s safe-haven status or cause sharp reversals. Using defined-risk options strategies can help us manage any sudden market changes. Create your live VT Markets account and start trading now.

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