Us Data And Fed Expectations
US data showed softer activity in March, with the S&P Global PMI easing to 51.4 from 51.9, an 11-month low. Services fell to 51.1 from 51.7, also an 11-month low, while manufacturing rose to 52.4 from 51.6. With the Strait of Hormuz effectively closed, prices have been influenced by oil-driven inflation risks and expectations of higher rates. Markets now expect the Fed to keep rates unchanged through 2026. Higher Treasury yields and a supported US Dollar have weighed on non-yielding Gold, while elevated oil prices have also supported the Dollar. Broad selling to raise liquidity has pressured global equities and Gold. Technically, Gold remains below declining 50- and 100-period SMAs on the 4-hour chart, with RSI at 39. MACD has improved, but resistance sits at $4,450-$4,500, then $4,795 and $4,983, while support is $4,300 and $4,098.Looking Back At The 2025 Low
Looking back, we remember the sharp rebound in gold from its 2025 lows near $4,098, which was driven by conflicting signals on US-Iran negotiations. That period of uncertainty created significant volatility as the market struggled for direction. The failure to find a quick resolution ultimately set the stage for the trends we are seeing today. The oil-driven inflation fears from that time proved to be well-founded, as the prolonged disruption in the Strait of Hormuz caused Brent crude to average over $115 per barrel in the final quarter of 2025. This directly fed into stubbornly high inflation figures through the start of this year. The latest US Consumer Price Index report for February 2026 showed headline inflation at 3.7%, still well above the Federal Reserve’s target. As a result, the market’s repricing of interest rate expectations, which began in 2025, has become our reality. We have seen the Fed hold rates steady at its first two meetings of 2026, with futures markets now pricing in less than a 20% chance of a rate cut before the fourth quarter. This has anchored the 10-year Treasury yield above 4.6%, maintaining significant pressure on non-yielding gold. For those of us trading derivatives, this means implied volatility in gold options may rise on any geopolitical headlines, but the underlying price driver remains the high cost of holding the metal. Strategies that benefit from a range-bound or slowly declining price, such as selling out-of-the-money call options, continue to be relevant. The strong US Dollar, with the DXY index currently holding near 106.20, provides an additional headwind that supports this view. From a technical standpoint, the resistance levels identified last year around the $4,500 mark proved to be a formidable ceiling. We have since seen prices grind lower, and as of today, gold is trading near $4,120. The key support level to watch in the coming weeks remains that critical 2025 low of $4,098. Create your live VT Markets account and start trading now.
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