Gold Near 4,100: Is This Another Dip-Buying Opportunity? Watch Oil Calendar Spreads💰📉

As the midterm elections approach, there has been a steady flow of signs of easing tensions in Trump’s foreign policy. First came renewed talks with Iran over the strait: although they have produced no result, the situation has not deteriorated further. Then came a Russia–Ukraine “energy ceasefire” over the weekend. Taken together, these developments suggest that Trump does not want any major upheaval before the midterms and is aiming to keep things as stable as possible. The latest U.S. CPI data will be released this week. As long as the reading does not exceed market expectations, the probability of a Fed rate hike at its October meeting is unlikely to rise much. We therefore expect markets to be broadly range-bound this week.

Gold Is Back Near 4,100: Another Chance to Buy the Dip?

As long as the Fed slows the pace of rate hikes, that would be relatively favorable for precious metals. So, provided this week’s CPI does not significantly exceed market expectations, the risks to gold and silver should be manageable. That would make buying gold around its current level similar in nature to buying the dip in July. The difference is that, although gold may be forming an interim bottom this time, its short-term rebound is likely to be smaller than the one in August while the rate-hike cycle continues. The 4,400–4,500 area is likely to present resistance. Investors may therefore be better off treating this as a short-term trade, or taking a small long-term position and adding to it gradually only after the trend is confirmed as the market develops.

Other strategies include repeatedly selling put options for income, with an acceptable price set for taking delivery. Alternatively, investors could buy put options with strikes outside the trading range and pair them with a long futures position. That combination offers less upside, but can also protect against losses caused by additional market volatility.

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Don’t Focus Only on Oil’s Direction: Go Long the Nearby–Deferred Spread

There is still no clear prospect of transit through the strait resuming, yet deferred futures contracts appear more optimistic about it. As a result, deferred WTI crude oil futures are priced relatively low, at a discount of about 12% to the spot price. Nearby futures contracts reflect spot prices. That means if the transit issue remains unresolved, deferred futures prices would move toward the spot price—or, at the very least, nearer-dated contracts would do so faster than contracts further out on the curve. At this stage, a spread trade between nearby and deferred crude oil futures is therefore more suitable.

The strategy works as follows: we generally pair contracts with delivery months three months apart—going long December and short March, or going long June and short September. Once familiar with the strategy, investors can select pairs four months or six months apart themselves. Three-month contract spreads are currently generally around $3 per barrel, which is not particularly attractive. But compared with trading oil’s outright direction, the risk is relatively manageable. The spread’s recent low has been above zero, implying a maximum risk of $3 per barrel based on that recent range. If oil prices surge again, the spread could widen further; in September, it reached as much as $10 per barrel. For now, this type of trade may be easier to manage from a risk-control perspective than a straightforward directional trade, while its potential returns need not be lower. It is worth investors’ attention.

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