Us Data Signals Slower Growth
US data pointed to slower growth, with Q4 2025 GDP (second estimate) revised down from 1.4% to 0.7% year-on-year. Core PCE inflation held at 3.1% year-on-year in January, while headline PCE eased from 2.9% to 2.8%. Markets priced in 20 basis points of easing, based on Chicago Board of Trade data. Standard & Poor’s warned that the Iran war could cause supply shocks, lowering US GDP growth and raising inflation. US petrol prices rose by more than 20% to $3.60 per gallon over two weeks. Traders are watching the Fed meeting on 17–18 March, plus Industrial Production, housing data, PPI, and jobs figures. Technical levels cited include support at $5,000, the 50-day SMA at $4,925, then $4,841 and $4,655. Resistance levels include $5,050, $5,100, and $5,238, and the RSI is below 50. Central banks added 1,136 tonnes of gold worth around $70 billion in 2022, the highest on record. Gold is described as moving inversely to the US Dollar and US Treasuries.February 2025 Support Break Confirmed
Looking back at the end of February 2025, we saw gold weaken as predicted due to a strong dollar and rising bond yields. The price did indeed break below the key $5,000 support level, confirming the bearish technical signals we were observing at the time. This move was driven by investors seeking safety in the Greenback amidst the ongoing Middle East conflict. The fundamental pressures on gold have not subsided in the weeks since. As of today, the US Dollar Index has remained strong, currently trading around 101.50, and the 10-year Treasury yield has crept higher to 4.35%. This environment continues to make non-yielding assets like gold less attractive for new capital. Inflation fears, which were a major concern, have proven to be persistent. The most recent inflation data for February showed Core PCE, the Fed’s preferred gauge, holding stubbornly at 3.2%, slightly above the prior month’s reading. This has been largely fueled by energy costs, with WTI crude oil prices staying elevated around $108 per barrel following the expanded US sanctions against Iran. With the Federal Reserve’s meeting just days away on March 17-18, market expectations have hardened significantly. The probability of a rate cut has been completely priced out for this meeting, with the CME FedWatch Tool now showing a 95% chance the Fed will hold rates steady. The primary focus will be on the Fed’s statement and any change in its forward-looking guidance on inflation and growth. Given this backdrop of high uncertainty and a major event catalyst, traders should consider strategies that can profit from a spike in volatility. A long straddle, buying both a call and a put option with the same strike price and expiration date on a gold ETF or futures contract, could be an effective way to play a significant price move in either direction following the Fed announcement. This strategy limits risk to the premium paid for the options. For those anticipating a hawkish tone from the Fed, which would likely strengthen the dollar and push gold lower, buying puts offers a more directional play. If the Fed signals rates will remain higher for longer than anticipated, we could see a test of the lower support levels identified back in February, such as the $4,841 swing low. This approach provides a defined-risk way to position for further downside in the precious metal. Create your live VT Markets account and start trading now.
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