Gold prices increased by 0.8% to $3,653 this morning in Europe, despite earlier profit-taking. The metal continues to rise, with few market influences in today’s trading. Several elements have led to this ongoing increase in gold prices, especially after a technical breakout following a consolidation period since late May. Gold’s activity remains strong amid a quiet European market.

US CPI Report on the Horizon

This week poses challenges for gold traders as everyone awaits the US CPI report. This report could shape market sentiment ahead of the US Federal Reserve meeting next week. Insights from the upcoming US PPI report are also expected. Gold is showing strong upward movement, pushing beyond $3,650 per ounce. Traders wanting to take advantage of this momentum might consider buying call options to capture further gains while managing their risk. This strategy is especially relevant given the recent technical breakout after months of price consolidation since May 2025. However, with the US CPI report this week and the Fed meeting next week, we should expect increased volatility. Implied volatility for near-term gold options has already risen, making both puts and calls more costly. This higher cost means traders need to be precise with their timing and strategy to ensure profits.

Inflation and Rate Cuts

Market expectations for the August CPI data release this week suggest inflation will remain stubborn at 3.4%, slightly up from July’s 3.2%. If the number exceeds expectations, it could lead to a quick drop in gold prices as the market reassesses the likelihood of a Fed rate cut. Such a dip might provide an opportunity to buy call options at a lower cost, similar to what happened after unexpected inflation figures in late 2024. Conversely, a lower inflation reading would likely strengthen expectations for a Fed rate cut, with the benchmark rate currently at 4.50%. This scenario could push gold prices even higher, breaking through recent resistance levels. To manage the high costs of options, traders might explore using bull call spreads to minimize entry expenses on bullish bets. Given gold’s significant rally this year, holding long futures positions carries substantial risk of a sharp pullback due to any negative news. To safeguard these gains during the upcoming data releases, purchasing put options can serve as short-term insurance. This strategy allows us to keep a core long position while limiting downside risks in the coming weeks. Create your live VT Markets account and start trading now.

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