Spike and Reverse! Gold Navigates a Bottoming Zone

Summary:

Inflation concerns triggered by rising oil prices may prompt the U.S. central bank to keep interest rates high for a longer period, thereby putting pressure on non-yielding assets such as gold.

BUY XAUUSD

EXP

TRADING

4028.96

Entry Price

4600.00

3700.00

4057.63 +4.99 +0.12%

0.0

Pips

Flat

3700.00

Exit Price

4028.96

Entry Price

4600.00

Fundamentals

Investors have scaled back their bets on a hawkish stance by the Federal Reserve. On Monday, money markets had expected the Fed to tighten monetary policy by more than 35 basis points by year-end, but according to Prime Terminal data, that expectation has fallen to just 18 basis points, implying a 72% probability of a rate hike in 2026. Inflation concerns sparked by rising oil prices may prompt the U.S. central bank to keep interest rates high for longer, thereby putting pressure on non-yielding assets such as gold. U.S. Central Command stated that it has “launched a new round of strikes against Iran to further degrade its ability to attack commercial vessels in the Strait of Hormuz.”

Driven by the cooling of June’s inflation data, the market has significantly scaled back its near-term rate hike expectations. Federal funds rate futures indicate that the probability of a 25-basis-point rate hike at the Fed’s July 28–29 meeting has fallen to about 10%, down from 35% prior to the data release; the probability of a rate hike at the September 15–16 meeting stands at about 60%, which, while still the prevailing view, represents a significant drop from the previous level of over 90%.

Technical Analysis

On the four-hour chart, the Bollinger Bands are widening downward, moving averages are diverging downward, and the MACD fast and slow lines continue to trade below the 0 line, indicating that the bearish trend remains intact. The RSI stands at 43, indicating strong market pessimism. On the daily chart, the Bollinger Bands are widening downward, and the moving averages are diverging downward. With the RSI at 40, market sentiment is predominantly bearish, and a test of the lower Bollinger Band is highly likely. However, gold is already approaching the bottom range; therefore, the recommended strategy is to buy on dips.

Spike and Reverse! Gold Navigates a Bottoming Zone_1

Spike and Reverse! Gold Navigates a Bottoming Zone_2

Trading Recommendation

Trading Direction: Buy

Entry Price: 4030

Target Price: 4600

Stop-Loss Price: 3700

Support Levels: 3900, 3600, 3500

Resistance Levels: 4200, 4300, 4600

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Spike and Reverse! Gold Navigates a Bottoming Zone

Risk Disclosure