Gold prices experienced a volatile session on Thursday, August 6, closing lower after an initial surge. The metal reached an intraday high of $4,303.86 per ounce early in the Asian session before retreating to a low of $4,223.42 during US trading hours, eventually settling at $4,240.51, down $6.9 or 0.16%. This decline was driven by a combination of factors: renewed geopolitical tensions following comments from former President Trump regarding the Strait of Hormuz and Iran's threats to restrict passage, stronger-than-expected US jobless claims data which remained below 200,000 for the third consecutive week, and speculation that Federal Reserve Governor Christopher Waller might support a September rate hike if inflation data remains strong.
Looking ahead to Friday, August 7, gold has opened with some strength, supported by the upper Bollinger Band and ongoing bullish momentum from recent sessions. However, the US Dollar Index appears to be bottoming out and showing signs of a potential recovery after a period of consolidation, which could cap further gains in gold. Additionally, crude oil prices rebounded decisively on Thursday, reclaiming their 200-day moving average, which may also limit the safe-haven appeal of gold. The upcoming US non-farm payrolls report is expected to show a strong labor market, further pressuring the precious metal. While the medium-term outlook remains constructive, with the recent pullback around $4,000 and even a potential drop to $3,700 seen as attractive buying opportunities for a new bull market leg higher, the short-term trajectory suggests a period of correction or consolidation as the market digests the recent rally.
Where to focus
From a weekly chart perspective, gold has staged a powerful rally this week, bouncing off its upward trendline support and regaining strength after a period of correction. It is now trading above the 5- and 10-week moving averages and has broken above the 60-week moving average resistance. The MACD indicator continues to show diminishing bearish momentum, while the KDJ indicator has formed a bullish crossover, suggesting the potential for a sustained move higher toward $4,500 or even $4,700. However, the week is not yet closed, and the daily chart still presents a bearish outlook. If the week closes back below the 60-week moving average, the risk of a renewed decline towards the recent lows remains.
Why near-term caution is warranted
On the daily chart, gold has once again consolidated above the upward trendline and is attempting to move higher. However, the 100-day moving average has already crossed below the 200-day moving average, forming a bearish "death cross." The previous session's close outside the Bollinger Bands, coupled with a bearish shooting star candlestick pattern, suggests that the current rally might be a counter-trend move within a larger downtrend. Unless gold can decisively break above and hold the $4,500 level, there remains a significant risk of a breakdown to new lows around $3,700. Therefore, a short-term or swing trading approach is advisable, taking profits on rallies towards resistance and looking for buying opportunities on dips to support levels.
Key intraday support levels are seen near $4,210 and $4,170, while resistance is located around $4,290 and $4,310. For silver, support is at $60.75 and $60.00, with resistance at $62.70 and $63.25.
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