Gold prices experienced a volatile week, ultimately closing higher but showing signs of a potential rebound top, as they now confront resistance at the 30-week moving average and a descending trendline.
For the week, international gold prices opened at $4,341.22 per ounce, initially strengthening and reaching a weekly high of $4,449.53 on Thursday before encountering resistance. Prices then declined, hitting a weekly low of $4,310.95 on Friday morning, before recovering to close at $4,375.42. This represented a weekly gain of $34.20, or 0.79%, with a total range of $138.58.
The rebound was supported by buying interest after prices held above the 60-week moving average, and by US inflation data signaling easing price pressures. However, gains were limited by ongoing geopolitical tensions, including the standoff over the strait and Middle East instability, as well as hawkish comments from some Federal Reserve officials.
Short-Term Outlook: Resistance and Data in Focus
On Monday, gold prices extended their recovery from Friday's lows, supported by a weaker US dollar following a disappointing US retail sales report. Intraday, prices face multiple resistance levels, and risk of a pullback remains unless a clear catalyst or a decisive break above the 30-week moving average emerges. Upcoming data, including the US August Empire State Manufacturing Index and NAHB Housing Market Index, are expected to be supportive for gold, potentially allowing for further upside before testing trendline resistance, after which a bearish reversal could occur.
Geopolitical tensions in the Middle East and the ongoing standoff over the strait could push oil prices and inflation higher, potentially strengthening the case for further rate hikes, which would pressure gold. Conversely, recent weak US employment and economic data have tempered rate hike expectations, limiting the downside for gold. In the short term, gold is expected to remain in a consolidation phase.
Long-Term Fundamentals Remain Constructive
From a medium- to long-term perspective, structural support for gold remains intact. Central banks, including the People's Bank of China, which has been adding to its reserves for 20 consecutive months, continue to accumulate gold. Geopolitical uncertainty and rising global debt levels also enhance gold's strategic value as a safe-haven asset.
Historically, since 1970, gold has experienced three major bear markets, each time retracing at least 50% of its previous rally. If current weakness persists, a test of the $3,600 or $3,300 levels could establish a more solid base and a new starting point for a bull market. Therefore, current levels or further declines could present attractive buying opportunities.
Technical Analysis: Key Levels to Watch
On the monthly chart, gold's rebound from July's support has been positive, but it faces resistance from the 5- and 10-month moving averages as well as a descending trend channel. A decisive break above these levels is needed to confirm a move towards the $5,000 level. The downside appears limited from current levels, suggesting any further declines would be buying opportunities.
On the weekly chart, gold's failure to break above the trendline resistance and the middle Bollinger Band suggests potential for further consolidation. However, prices are holding above the 60-week and 5-10 week moving averages, providing underlying support. The outlook is for sideways trading until a clear breakout above the trendline or a decline below the 60-week moving average occurs, which could offer buying opportunities at the ascending trendline or 100-week moving average.
On the daily chart, gold is repeatedly encountering resistance near the descending trendline. Until a sustained break above this level is confirmed, there is risk of a pullback. Selling near resistance remains a viable strategy, while buying on dips near the 10-day moving average or the middle Bollinger Band is recommended. Key intraday support is seen near $4,360 and $4,300, with resistance at $4,410 and $4,430. For silver, support is near $64.50 and $63.90, with resistance at $65.80 and $66.60.
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