Despite the US Dollar Index hitting an 18-month high, gold prices have slipped 14% from their August peak but are now showing signs of stabilizing.
Falling trading volumes and weakening bearish momentum suggest that selling pressure is easing, while technical support above the $4,000 level has laid the groundwork for a potential rebound toward $4,300.
However, upcoming US inflation data, retail sales figures, and remarks from Federal Reserve Chair Kevin Warsh could determine whether gold bulls can regain control of the market.
Gold Price Outlook: Gold Quietly Gathers Strength as the Dollar Rally Continues
US Dollar Index (DXY) Technical Outlook
The US Dollar Index continued its advance on Monday, on track for a fifth consecutive weekly gain.
Traders appear to be pushing the dollar higher ahead of this week's inflation data and retail sales report, while Fed Chair Kevin Warsh is also scheduled to speak this week.
But as prices approach resistance levels and with markets already pricing in strong data and hawkish commentary, I am now starting to question whether the dollar has risen too far in the short term.
As long as CPI does not come in excessively strong, it could buy more time for the Fed — we have already seen traders push back their expectations for the first rate hike.
So while the news spotlight is on the DXY reaching an 18-month high, I am instead noticing the resistance levels above and the possibility that the data may not be as strong, or the rhetoric as hawkish, as bulls are hoping.
This could set the stage for a gold price rebound.
Gold Futures (GC) Technical Outlook
After falling 14% from its August high, gold is showing signs of weakening bearish momentum above the $4,000 level.
In my view, dip-buying bulls will not wait for prices to test major round-number levels.
A small bullish pin bar formed last week, which appears to be a tentative attempt at a trend reversal.
And during gold's recent decline, the lower indicators show that weekly ranges have generally been trending downward.
Also note that weekly volume has been declining, which is not a convincing signal during a bearish move.
The weekly RSI(2) also entered oversold territory two weeks ago and is now poised to rise alongside gold prices.
Gold Price Outlook: Bulls Prepare to Buy Dips Above 4091
The daily chart shows a small attempt on Friday to break through trend resistance.
Low volume made Monday's pullback less surprising, especially with US CPI, retail data, and Warsh's speech on the horizon.
In a sense, this actually gives me hope that gold will continue a modest pullback within last week's range.
Also note that last week's low held above the high-volume node (HVN) at 4082.2, which is naturally near the lower band of the one-week implied volatility range.
The first upside target I see is the monthly pivot point, just below the 4,300 mark and the upper band of the one-week implied volatility range.
In short, I suspect gold is quietly building strength, which could prompt bulls to lean toward buying dips above the 4091.2 low.
Source: COMEX, TradingView Gold futures (GC) weekly and daily technical charts show weakening bearish momentum, support above $4,091, and a potential upside target of $4,300.
Gold Attempts to Build an Intraday Base
The 1-hour chart shows that Monday's pullback is attempting to form a base near 4,180 — multiple technical levels converge at this area.
Monday's low did not break below the weekly pivot point or the month-to-date VWAP, and price is currently holding above the 200-period moving average.
This could clear the way for an intraday rally today, though the risk of a deeper pullback remains.
If this level breaks, bulls may look for evidence of a swing low near the 4166.8 high or around 4130, near the weekly S1 pivot and the swing low.
Source: ICE, TradingView
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