Right after the latest CPI print, a market that looks calm on the surface may in fact be quietly brewing a turning point—and an opportunity. In this piece, Owen wants to talk about the topic that is probably on everyone's mind: has the moment to go long gold finally come?
Let's lead with our core conclusion: gold is very likely to see a sizable rebound. The reason is that, with CPI unexpectedly cooling, the market's expectations for Fed rate hikes have already faded. The 2-year Treasury yield has broken below its uptrend, dragging the US Dollar Index into a bearish technical structure. Once the Dollar Index breaks its key level, a gold rebound could well be triggered. But this is only a “rebound,” not a “reversal”—to lock in this move steadily, we still have to strictly follow the discipline of our trading system.
Next, let's break down the trading logic behind it:
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Cold CPI and the Retreat of Rate-Hike Expectations
The latest CPI data can only be described as a surprisingly cold shock. In June—a month when end-user energy products such as heating oil and gasoline did not fall sharply—headline CPI nonetheless posted a clear decline. More importantly, core CPI, which strips out energy and food, also came in below expectations, extending the earlier cooling trend:
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The drop in energy-related inflation components even hit its largest in years.
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Assuming this “surprise” print has no hidden distortions, what does it mean for the macro fundamentals?
First, rate-hike expectations are bound to be revised down. Judging from the 2-year Treasury yield, which has already broken below its uptrend, the market no longer expects two more rate hikes over this year and next.
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The Fed's policy rate ceiling currently stands at 3.75%, and the 2-year Treasury yield—the purest gauge of priced-in rate-hike expectations—is currently at 4.1%, implying fewer than two hikes over this year and next, a sharp drop from before. Judging from how the overnight index swap (OIS) derivatives market is pricing future hikes, the odds of a July hike have vanished entirely, while the priced-in odds for September have fallen below 50%.
On top of that, from the angle of political maneuvering, US government debt is climbing rapidly—bear in mind that federal debt grew by nearly $3 trillion in a single year:
What the Trump administration craves most right now is actually an environment of rate cuts, because every additional hike only piles more onto the federal government's fiscal deficit. Even if the Fed insists on its independence and refuses to cut, under pressure from Trump it can at least no longer hike so easily. This cooling in inflation has undoubtedly handed Trump an excellent pretext.
The Dollar Index Breaking Down and Its Link to Gold
The decline in Treasury yields has dragged the US Dollar Index down with it. The Dollar Index has not only formed a double-top pattern but has also entered a downtrend, with the 5-day MA crossing below the 10-day MA; in the short term, it will struggle to reclaim the 20-day MA. Right now the Dollar Index is stabilizing near the key level of 100.5. If this support is broken, the dollar's decline will widen further.
When the dollar falls, gold rises—a classic seesaw effect.
Against the backdrop of the Dollar Index facing a breakdown risk, and based on both the fundamental logic and seasonal patterns, it is a reasonable assumption that gold sees a rebound in the short term (with a magnitude possibly around 10%). Gold has already built a decent bottoming structure. Once the dollar breaks below 100.5, there is a high probability it will spur a gold rebound.
But please stay clear-headed: this is only a rebound, absolutely not a reversal. Next, let's break down gold's price action from the perspective of our technical trading system.
Breaking Down Gold's Technicals
First, from the long-term monthly chart, we do not believe that the Dollar Index's decline signals the end of this months-long “dollar's parting shot” rally:
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History shows that any short-term dip in the Dollar Index can, for now, only be viewed as low-level consolidation and bottoming. A one-to-two-month pullback is often the setup for an even more forceful surge afterward. Since the dollar's long-term uptrend has not ended, gold's so-called “start of a long-term uptrend” (i.e., a reversal) is out of the question. We can only treat gold's coming move as a stage-by-stage rebound to trade.
So how do we precisely capture this gold rebound? Since it is a rebound, the key is getting in and out quickly and picking a precise entry point.
First, from the weekly perspective, the depth of this gold pullback has already broken every weekly-retracement record since 2023, and has even slightly dipped below the 65-week MA. This tells us that gold's main declining wave on the weekly chart has already threatened the uptrend in place since 2023.
You could say gold is now squarely in a weekly-degree main declining wave. The one rebound signal worth noting is that the area of the weekly MACD green histogram bars is steadily converging upward, which means the weekly chart may fall into a flat, sideways range—thereby creating room for a rebound at the daily degree.
Now look at the daily chart. If you study gold's candles carefully, you'll spot a pattern: every time the daily chart forms a “top fractal” candle combination, the 20-day MA is usually hugging right nearby. And right now, gold's daily top fractals (with the inclusion relationship handled) keep stepping lower—not one new top fractal has managed to exceed the previous one. This shows that the daily degree is also within a main declining wave:
At the same time, the bullish (bottom) divergence on the daily MACD is not obvious (the green bars have not shrunk in a regular way as price stepped lower). This means the initial thrust of a daily rebound may not be strong; gold will, at the very least, have to fall into a period of consolidation before it can truly kick off a rebound. If the rebound is to evolve into a genuine “reversal,” price must at minimum break above the top-fractal high on the weekly chart—and that level is far too high. Catching a trend has to be done one step at a time.
Entry Conditions and Strategy for Going Long Gold
So where exactly is the signal to go long gold? Two stringent conditions must line up in resonance:
· The Dollar Index clearly breaks below the 100.5 support.
· The price of the front-month gold futures contract breaks decisively above the 20-day MA; and to break the main declining wave, price must subsequently at least break above the most recent top fractal (roughly around the 4236 level).
Only when both of these conditions are met can we enter to go long the gold rebound.
If your trading style leans conservative—you don't want to bear gold's recent violent swings and just want to earn some steady income during this choppy stretch—then the option-selling side is still a good place to be: you can consider, at strikes below the 20-month MA of gold futures, rolling weekly to sell puts on gold futures and collecting the time-value premium. But the moment this seller's strategy has its strike broken, you must stop out immediately. (Friends without futures-options trading permissions can use gold ETFs as a substitute and find the corresponding levels.)
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