On August 3rd, last Friday, we noted that after hitting a new weekly high, gold encountered resistance and pulled back. The Federal Reserve's effectively high interest rates continue to pressure gold prices, and short-term technical indicators also suggest that the risk of a pullback has increased following the rebound. Therefore, we recommended in our trading strategy to watch for upper resistance at $4,070 and then $4,100, with lower support at $4,050, and a break below that could target $4,000.
Looking at the subsequent price action, during the European session on Friday, gold tested the $4,050 support level multiple times and held steady. It wasn't until the US market opened that gold broke lower, hitting a fresh daily low of $4,020. After finding support and rebounding, gold traded sideways around the $4,050 level until the close. At the start of this week, gold opened slightly higher, rose to $4,082, met resistance, and then traded in a volatile decline. It tested the $4,046 support level several times and held, and is currently trading near $4,055. Overall, gold's rebound lacks momentum, and the short-term trend remains under pressure.
A Wolfinance star-rated analyst believes that Monday's gap-up opening was primarily driven by weekend comments from Trump, who cancelled a strike on Iran based on expectations of a deal and a promise to reopen the Strait of Hormuz. This caused oil prices to plummet, supporting gold's rebound. However, the actual price increase was limited, and the gains were quickly retraced after the gap-up. This was mainly because Iran denied the claim, calling it a new lie, which keeps geopolitical uncertainty at a high level.
Looking at the broader trend, gold has been trading under pressure recently. This is primarily due to the hawkish shift in the Federal Reserve's stance from a dovish bias, driven by high inflation expectations. The Fed Chair's commitment to unwaveringly bring inflation back to target levels has strengthened market expectations for the Fed to maintain high interest rates. The risk of rising real interest rates has increased, putting significant downward pressure on gold prices.
On the daily chart, gold continues to trade under pressure after its rebound stalled. On the downside, support can be found at the daily low of $4,046, which has been tested and held multiple times. A break below this level could target the $4,000 round number and the July low near $3,960. On the upside, resistance is at the daily high of $4,082, which has been tested and rejected multiple times, followed by the previous week's high of $4,120, which also acted as resistance during the rebound. The 5-day moving average has formed a bearish crossover, the MACD indicator's bullish crossover is slowing significantly, the KDJ indicator is pointing downwards with a bearish crossover, and the RSI indicator is showing a weak bullish crossover but remains in the weak zone. Short-term technical indicators suggest that after the rebound stalled, there is a risk of further decline.
Gold's trading strategy for the day: Despite Trump's claim of cancelling the strike on Iran leading to a sharp drop in oil prices, gold's rebound is limited, and the trend remains under pressure due to the significant risk of rising real interest rates. The recommended approach is to treat the market with a range-bound mindset. Upward pressure should be watched at $4,082 and $4,120. Downward support should focus on a break below $4,046, with a continued decline potentially targeting $4,000 and $3,960.
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