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Gold price stays near monthly peak despite negative bias and weak selling pressure
Gold prices fell after hitting a one-month high during the Asian trading session. The decline comes amid a small rise in the US Dollar and positive market sentiment that pressures gold.
Although there isn’t strong selling momentum, gold remains near its peak from June 16. Optimism about a US-Japan trade deal enhances market conditions but reduces gold’s appeal as a safe asset.
Uncertainty about the Federal Reserve’s interest rate cuts has prevented the US Dollar from bouncing back after reaching a two-week low. This uncertainty supports gold prices, but lower demand for traditional safe havens affects gold’s current performance.
The US-Japan trade agreement, announced by President Trump, introduces 15% tariffs and opens up increased trade, influencing the market mood. The path of US interest rates is still debated, as discussions about changes in Federal Reserve leadership and its independence shape investor decisions.
In the coming sessions, traders will focus on US home sales data and global PMIs, both of which could further affect gold prices. Technically, breaking past key resistance levels offers a bullish view, although price drops may present buying chances. More selling could complicate this outlook, possibly lowering prices to earlier resistance levels.
We see the current gold price dip as a pause amid conflicting economic signals rather than a clear downtrend. The slight rise in the dollar is countered by ongoing uncertainty over monetary policy. This mix of forces makes options strategies particularly beneficial as we navigate the upcoming weeks.
The positive market environment is supported by the CBOE Volatility Index (VIX), recently trading near a low of 13, indicating reduced investor anxiety and lower demand for safe havens. This optimism, fueled by deals discussed by the former president, makes short-term call options on gold more affordable. This presents a tactical opportunity for traders anticipating a market reversal.
Uncertainty around the Federal Reserve remains a key support for gold. The latest US Consumer Price Index data from May showed a cooler than expected increase of 3.3%, leading futures markets to price in a 62% chance of a rate cut by September, according to the CME FedWatch Tool. This backdrop should help prevent a significant drop in gold prices.
Given the recent technical breakout, we see price declines toward key support levels as chances to take bullish positions. Traders might consider buying call options with strike prices above the recent peak or selling cash-secured puts below current support to earn premium while waiting for a better entry. This approach can help define risk while keeping upside potential.
If selling pressure drives prices below the 50-day moving average, currently around $2,300 per ounce, it would challenge the bullish outlook. In that case, buying put options would be a smart way to protect existing long positions or bet on a deeper correction. This provides a clear, data-driven reason for a defensive strategy shift.
Upcoming global PMI data will be crucial, as gold has historically performed well when manufacturing numbers dip below the 50-point mark, indicating economic contraction. We will closely monitor these figures and US home sales data to assess economic health. These indicators could spark renewed safe-haven buying and strengthen a long-term bullish outlook on gold.
Chris Turner from ING reports that global equity markets are rising after news of a US-Japan trade agreement.
Global equity markets are rising after the US and Japan announced a trade deal. The agreement includes US tariffs on Japanese goods set at 15%, down from the previously suggested 25%.
Japan has committed to buying US planes and rice and may create a large sovereign wealth fund for investments in the US. Meanwhile, industrial metals are gaining popularity, benefiting currencies like the Australian dollar, Brazilian real, and South African rand.
US dollar struggles
The US dollar is struggling, with recent losses possibly due to a shift in investments towards Europe and Emerging Markets. There’s anticipation for the upcoming June existing home sales report, which could indicate good news for the housing market. Commodity-related currencies might serve as protection against unexpected changes in US financial policies. The currency market remains complicated, highlighting the diverse financial activities happening worldwide. We see this trade agreement as a key driver for increased market optimism. To take advantage, we are buying call options on broad equity indices that are closely linked to global growth. The S&P 500 has already risen over 4% in the past month, and we believe this upward trend will continue. The rise in industrial materials, with copper trading above $4.50 per pound, signals stronger economic activity. This supports our strategy of investing in commodity-linked currencies through derivatives on the Australian dollar. Historically, the AUD/USD exchange rate has closely followed base metal prices during times of global growth, showing a strong positive correlation of over 0.7.Preparing for growth in the housing sector
Given the US dollar’s struggles, we are looking at put options on the U.S. Dollar Index (DXY), which is nearing important support levels. The index has recently sat around the 104 mark, and a significant drop could boost the shift in asset allocation we’ve mentioned. Recent data from the Institute of International Finance revealed that emerging markets attracted over $30 billion in portfolio inflows last month, confirming that capital is moving away from dollar assets. We are also preparing for the anticipated strength in the housing sector. The latest data from the National Association of Realtors showed a slight decline, but median existing-home prices increased year-over-year, indicating steady demand. Thus, we believe call options on homebuilder ETFs could benefit from positive surprises in June’s sales figures. For those heavily invested domestically, we recommend using options on the highlighted commodity currencies as a useful hedge. If US financial policies tighten unexpectedly, it could pressure local equities and bonds. However, a long position in the Brazilian real or South African rand would likely do well in that situation, given their ties to the global materials rally. Create your live VT Markets account and start trading now.Home sales hit 3.93 million, falling short of expectations, as prices and inventory levels keep increasing.
### US Existing Home Sales Insights
In June, home sales closed with a 30-year fixed mortgage rate of 6.77%. Homes are now averaging 27 days on the market, up from 22 days. First-time buyers account for 30% of sales, which is below the historical average of 40%. Additionally, 29% of sales are all-cash transactions.
An economist pointed out that years of low supply are driving home prices to record highs. Home construction isn’t keeping up with population growth, making it harder for first-time buyers to enter the market. Increasing supply is essential for getting more first-time buyers involved in the coming years.
With the recent decline in home sales, we see a chance for bearish opportunities in housing-related equities. Fewer transactions will directly affect the revenues of homebuilders and real estate services companies. As a result, we are considering buying put options on ETFs like the SPDR S&P Homebuilders ETF (XHB) to take advantage of potential declines.
### Home Builders Sentiment
Recent data from the National Association of Home Builders shows that their sentiment index dropped to 43 in June 2024, marking the second month in a row below the break-even level of 50. This suggests builders are feeling pessimistic about the market, reinforcing the reported sales weakness. This lack of confidence within the industry supports our negative outlook.
The slowdown mentioned by Michalowski is also apparent in commodity markets, giving traders another perspective. Lumber futures, which indicate construction demand, are currently trading around $460 per thousand board feet. This is more than 60% lower than their 2022 highs. We see this as a strong indication of falling demand for new builds, aligning with concerns raised by Yun.
The ongoing lack of supply is creating a unique situation: prices are at record highs, but sales volume is low. This clash between high prices and low activity raises market uncertainty and potential volatility. We believe that option strategies, like straddles on the iShares U.S. Home Construction ETF (ITB), could be beneficial, as they profit from significant price changes in either direction.
Moreover, the weak housing market may impact the Federal Reserve’s monetary policy. Historically, when housing shows considerable weakness, it often leads to a more lenient approach to interest rates. We will be closely watching derivatives related to federal funds futures, as ongoing housing issues could increase the likelihood of future rate cuts.
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The US dollar stabilizes around 0.7920 against the Swiss franc as market sentiment improves.
USD/CHF is currently around 0.7920 after declining for three consecutive sessions. The US Dollar has remained stable, thanks to positive market sentiment following new trade agreements. President Donald Trump recently announced a deal with Japan, which includes a 15% tariff on Japanese exports and a $550 billion investment from Japan into the US.
Despite this, the US Dollar might face challenges because of worries about the Federal Reserve’s independence. Trump has criticized Fed Chair Jerome Powell, stating that interest rates should be at 1% because the economy is strong.
Swiss National Bank Update
The Swiss National Bank (SNB) is expected to hold off on any further changes to monetary policy after the inflation report from June. The annual Swiss Consumer Price Index (CPI) increased by 0.1% in June. It’s anticipated that the SNB will keep the interest rate at 0% in September and likely beyond 2026. The Swiss Franc, one of the ten most traded currencies, tends to rise during market volatility due to Switzerland’s stable economy and neutrality. The SNB aims for inflation below 2%. When inflation rises, the SNB may increase rates to strengthen the CHF, while lower rates usually weaken it. Switzerland’s economic reports are vital for understanding the economic climate, which directly affects the CHF’s value. The stability of the European Union’s economy is also crucial for Switzerland and the CHF.Potential For Derivative Traders
Currently, there is a divergence that offers opportunities for derivative traders. The US Dollar is under pressure from internal issues, while the Swiss Franc benefits from a stable monetary policy. This situation suggests that the USD/CHF pair may trend downward. The American Dollar is facing challenges due to Trump’s criticism of Powell and calls for significantly lower interest rates. With the Federal funds rate at a target range of 5.25%-5.50% and a Consumer Price Index showing inflation at 3.3%, it’s unlikely the central bank will implement the deep cuts Trump has suggested. This uncertainty could negatively impact the dollar’s value. In contrast, the Swiss monetary policy remains steady, maintaining a policy rate of 1.25%. With annual inflation in Switzerland at a manageable 1.4%, there’s no immediate need for a policy change, reinforcing the franc’s status as a safe haven. Historically, during global economic or political uncertainty, money tends to flow into Switzerland, boosting its currency. Considering these factors, we believe the USD/CHF pair may continue to decline. Traders might consider buying USD/CHF put options. This would allow them to profit from a decrease in the pair’s value over the next few weeks. Buying put options is a well-defined risk strategy, limiting potential losses to the premium paid for the options. The pair has already shown a downward trend, dropping from over 0.92 earlier this year, and this strategy enables participation in further declines. It offers exposure to potential losses while protecting capital from any unexpected strength in the dollar. However, traders should closely monitor Europe’s economic health, as it plays a significant role for Switzerland. Recent indicators, like the decline in the HCOB Flash Eurozone PMI, reveal some regional weakness. A serious downturn in the European Union could negatively impact the Swiss Franc. Create your live VT Markets account and start trading now.US dollar weakens for four days as Canadian dollar gains from optimism
The US Dollar has fallen for four consecutive days, while the Canadian Dollar is gaining strength thanks to positive market sentiment from a trade deal between the US and Japan. The USD/CAD exchange rate has dropped below 1.3600, losing about 1.20% over the past four days and is close to its lowest point this year.
Canada is currently in talks with the US to avoid a 35% tariff that President Trump announced. However, hopes for reaching an agreement before the August 1 deadline are low, as neither side’s position has changed. Prime Minister Mark Carney has suggested that Canada might leave the negotiations without a deal.
Crude Oil Prices And Their Impact
Crude oil prices are low due to worries about an oversupply from increased production and decreased demand. As a major oil exporter, Canada could be impacted, which may affect the value of the Canadian Dollar, often called the Loonie. Economists are debating the effectiveness of tariffs aimed at protecting local producers by making imported goods more expensive. Donald Trump plans to use tariffs to boost the US economy while reducing personal income taxes. In 2024, Mexico, China, and Canada made up 42% of US imports, with Mexico at the forefront at $466.6 billion. The tariffs collected from these countries are expected to help lower income taxes. The recent decline in the US Dollar is pushing the exchange rate toward yearly lows. However, this downward trend may face opposition due to fundamental factors, such as Canada’s inflation rate dropping to 2.7% in May. This suggests that the Bank of Canada might have the room to lower interest rates further, which could limit the Loonie’s strength.Trade Negotiations And Market Volatility
The main source of market volatility is the trade negotiations leading up to the August 1 deadline set by the President. A failure to secure an agreement, a scenario suggested by Carney, could lead to a sharp reversal in current trends. This is reminiscent of the 2018-2019 trade disputes, when previous tariff deadlines caused the VIX, a measure of market volatility, to spike above 40%. Crude oil prices, crucial for Canada’s resource-driven economy, add more uncertainty. While WTI crude has increased to over $80 a barrel due to a recent drop in US inventories reported by the EIA, the market is still sensitive to demand forecasts. Renewed fears of oversupply would put additional pressure on the Canadian Dollar, regardless of the trade outcome. Given these conflicting factors, traders should brace for significant price swings rather than favoring a specific direction. Current market prices indicate that one-month implied volatility for USD/CAD options is high, exceeding 7%. This suggests that the market is preparing for changes. As a result, strategies like long straddles or strangles, which profit from large movements in either direction, may be the most sensible approach. Create your live VT Markets account and start trading now.Trump celebrates the biggest Japan deal to date as US stocks and yields rise
President Trump is celebrating the successful tariff deal with Japan. As these trade agreements move forward, the US Treasury is benefiting from increased revenue. The stock market is also doing well, with the Dow up by 0.49%, the S&P rising by 0.31%, and the NASDAQ increasing by 0.17%.
US yields are rising, indicating that inflation is expected to stay steady. The 2-year yield is at 3.854%, the 10-year yield is at 4.375%, and the 30-year yield is at 4.943%, each up by a few basis points.
Currency Fluctuations
The EUR/USD is trading lower, which means the US dollar is stronger. This is below both Monday’s high of 1.1716 and the 61.8% retracement from July trading at 1.17252. At the same time, the USD/JPY remains stable as traders consider the impact on central bank policies and possible inflation growth. Several factors are affecting this situation. Tariff revenue is helping the US Treasury, while rising prices for goods are a concern. US defense firms benefit from profitable contracts and exports. Farmers are seeing gains from higher exports, but US auto manufacturers are struggling with tariffs, pricing, and foreign markets. This highlights the complex nature of these ongoing trade issues. The increase in US yields signals that the market expects inflation to persist, even though the latest Consumer Price Index shows a slight decrease to 3.3%. This tension between bond market expectations and recent data presents opportunities for traders to use options on Treasury ETFs to speculate on future interest rate changes. Historically, when Federal Reserve signals don’t align with single data points, it often leads to erratic yet tradable bond markets.Market Opportunities
The stronger US dollar, as shown by the Dollar Index (DXY) recently surpassing 105, is likely to continue putting pressure on foreign currencies. Traders should think about buying call options on dollar-tracking ETFs like UUP to benefit from this trend, driven by favorable interest rate differences. The recent lows in the EUR/USD further confirm this direction. Despite US stocks opening higher, uncertainty around policy suggests that market calm may not last. The CBOE Volatility Index (VIX) is trading at low levels around 13, making call options on it a smart, cost-effective hedge against a potential rise in market anxiety. Low pricing for portfolio insurance often precedes times of increased volatility. Targeted bullish investments in the defense sector seem promising due to the boost from international contracts. We are considering call options on major defense companies, which have already shown strength due to ongoing geopolitical demand. Additionally, tariff revenue, projected by the Congressional Budget Office to exceed $100 billion this year, supports the US Treasury and strengthens the dollar. However, it’s important to recognize potential negative impacts in other sectors. While farmers benefit from new export deals, a strong dollar makes their goods pricier on the global market, which could limit their profits. In this complicated environment, traders might think about using put options on specific industrial or agricultural ETFs to hedge against the downsides of these trade policies. Create your live VT Markets account and start trading now.Trump criticizes Powell for US housing issues while trying to influence other board members in posts.
President Trump has once again criticized Federal Reserve Chair Jerome Powell in a post on Truth Social. He refers to “The Board,” suggesting he may try to influence other members.
The tension between Trump and Powell is ongoing, and Trump’s comments indicate he has a broader strategy in mind. This suggests that Trump aims to impact monetary policy beyond just Powell.
Political Risk in Monetary Policy
The former president’s public criticism adds political risk to monetary policy. This creates uncertainty that goes beyond economic data, making traders factor in possible future pressures on the Federal Reserve. We should prepare for more unpredictable policy signals in the coming months. The market is already expecting rate changes. The CME FedWatch Tool shows a greater than 60% chance of a rate cut by the September meeting. However, this new political element might either speed up that timeline or lead the central bank to delay decisions to maintain its independence. This tug-of-war makes short-term interest rate futures less predictable. This situation is likely to increase volatility. Historically, the VIX index, which measures anticipated market volatility, has risen during times of political tension affecting economic institutions. Traders should think about buying options for protection, as the cost of this insurance will likely rise as the election approaches.Influencing the Board
Trump’s reference to influencing other board members is an important point that hints at a long-term strategy. This means that even if Powell remains steady, the makeup of the voting committee could change in the future. Therefore, we should consider looking at longer-dated derivatives, especially those expiring in early 2025, to protect against significant policy shifts. However, we must pay close attention to the data, as Powell will rely on it to shield himself from political pressure. With the latest annual inflation rate at 3.3%, well above the 2% target, he has strong reasons to resist calls for immediate and aggressive cuts. Any move away from this data-driven approach would signal a notable impact from political pressure. Create your live VT Markets account and start trading now.Oil prices fall as tariff concerns rise and deadline approaches, with ICE Brent down 0.9%
Oil prices fell, with ICE Brent down 0.9%, amid concerns about potential tariffs. There are worries about a market surplus later this year, adding to market troubles.
While forecasts indicate a surplus in Q4 2025, the ICE Brent forward curve suggests otherwise. It previously showed backwardation until November 2025, followed by contango, reflecting expectations of oversupply.
Forward Curve Developments
Right now, the curve shows backwardation into early next year, flatness for most of 2026, and shallow contango by 2027. The spread from Dec-25 to Dec-26 shifted from a contango of over $1.80 per barrel in May to about $0.65 per barrel in backwardation now. Recent data from the American Petroleum Institute shows that US crude inventories dropped by 577,000 barrels, while stocks at Cushing increased by 314,000 barrels. Gasoline inventories decreased by 1.2 million barrels, but distillate stocks rose by 3.5 million barrels, which might help ease tight conditions for middle distillates. The Energy Information Administration will soon release its inventory report. Current market conditions highlight the need to keep an eye on oil inventory trends and forward curve changes. With recent price drops tied to tariff fears, we see demand destruction as a major risk. On June 12, the U.S. Federal Reserve suggested only one possible interest rate cut this year, pointing to slower economic activity. This economic pressure indicates that holding long positions on crude futures may be risky for now.Opportunities in Calendar Spread Trades
A clear indicator is the structural change in the ICE Brent forward curve. The shift in the Dec-25 to Dec-26 spread from contango to backwardation shows that the physical market is tighter than overall sentiment indicates. This suggests possible opportunities in calendar spread trades that could benefit from short-term strength compared to longer-term contracts. The latest inventory data from the American Petroleum Institute presents a complicated picture that calls for caution. The decrease in gasoline inventories is a positive sign for the upcoming summer driving season, but the substantial increase of 3.5 million barrels in distillate stocks raises concerns. This could negatively impact refining margins, known as crack spreads, for diesel and heating oil. We must also keep in mind supply dynamics from the OPEC+ alliance. Their recent discussion of possibly unwinding production cuts starting in October supports surplus projections. Historically, following these plans can be inconsistent, and geopolitical events often disrupt expected supply changes. This creates a fundamental conflict between the current tight market and future supply promises, likely increasing volatility. Create your live VT Markets account and start trading now.The US dollar weakened overnight as UST yields fell, with the DXY at 97.42.
The US Dollar dropped again overnight, with the DXY index ending at 97.42. There aren’t any major economic reports or Federal Reserve discussions for the markets to focus on; the attention is instead on existing home sales data.
The bullish trend on the daily chart is weakening, and the Relative Strength Index is also declining. Current support is at the 97 level, while resistance can be found at 97.60, 98.50, and 99.60 at various retracement levels.
Market Reactions
In the meantime, the USD/JPY is retreating during the early European hours, moving closer to the 1.1700 level. GBP/USD is stable around 1.3550, bolstered by positive sentiment from a new US-Japan trade deal. Gold prices have slightly recovered from daily lows but remain subdued due to the optimism over the US-Japan agreement. Binance Coin (BNB) reached a new high of $804.70, surpassing Solana’s market cap, with total capitalization exceeding $110 billion. Forex trading involves significant risks and may not be appropriate for everyone; high leverage can magnify both profits and losses. It’s crucial to carefully consider your investment goals, experience, and risk tolerance before trading foreign currencies. With the current state of the US Dollar, we advise derivative traders to brace for increased volatility. The latest Consumer Price Index for May showed a cooler reading of 3.3%, putting initial pressure on the Dollar. However, the Federal Reserve’s updated forecast now expects only one interest rate cut in 2024, which provides a strong support against any major sell-off.Technical Analysis and Strategy
We’re focusing on the 104 level on the index as a key support zone, noting significant buying interest there. Resistance is forming around 105.50, a level tested multiple times since April. We consider selling out-of-the-money puts near support and calls near resistance as a good strategy to gain premiums in this range-bound market. The yen pairing is particularly sensitive, trading close to the 157 level where Japanese officials intervened with over $60 billion in late April and early May. This creates a risk of another sharp drop if authorities decide to intervene again. We recommend avoiding aggressive long positions and buying puts as a hedge against any sudden actions. Meanwhile, the pound is stable around 1.2700, but we think this is a short-term calm before a potential decline. UK inflation data suggests cooling, leading the market to believe there’s over a 60% chance the Bank of England will cut rates by its September meeting. This divergence from the more hawkish US central bank could cause a gradual drop in the currency pair during the summer. Gold has retreated from its all-time high above $2,400 per ounce, but we see this as healthy consolidation. Central banks are still buying at record levels, with China adding to its reserves for the 18th month in a row before pausing in May, providing strong demand for the metal. We suggest using any dips towards the $2,300 support level to start or build long-term call positions. In the crypto market, Binance Coin has recently pulled back from its record high above $700. Its market cap of around $88 billion reflects the competitive nature as funds shift between major digital assets. Traders should stay alert; the optimism that fueled the recent rally seems to be fading, which could require protective strategies. Create your live VT Markets account and start trading now.Lutnick suggests Japan’s tariff cuts could influence EU policies, impacting the US automotive market and inflation.
Japan has lowered its tariff rate to 15% through investment deals. This rate is believed to be just enough for Japanese automakers to keep producing in Japan. It could set a standard for the EU, where larger countries may not drop tariffs below 15%, but smaller ones might. There was no clear answer on whether automakers will face this tariff directly.
President Trump is likely paying close attention if the EU opens its markets to U.S. cars and products. There is a focus on strategic export controls, including restricting advanced chips and advanced missiles from China. Since China supplies magnets, there may be some easing on restrictions for Nvidia H20 chips. In the stock market, U.S. stocks have eased slightly from earlier highs. The Dow is up by 244 points, while the S&P and NASDAQ also see gains.
