On August 17, last Friday, we noted that cooling U.S. inflation data and weak employment figures provided significant support for gold. However, the recurring situation in the Middle East has sparked expectations that potential energy supply disruptions could push inflation higher, leading to market concerns about further interest rate hikes. This has limited gold's short-term upside potential. With a mix of bullish and bearish factors, gold has remained in a high-level consolidation. Therefore, we advised investors to watch the support level at $4,310 and the resistance level at $4,364. A breakout above could target $4,400, followed by $4,450.
In subsequent trading, during the European session last Friday, gold extended its rebound from the $4,310 support level seen in the Asian session. It dipped to $4,348 before rallying, reaching $4,397 during the U.S. session before encountering resistance. Gold made multiple attempts to break higher but failed to overcome the key $4,400 psychological barrier. It settled near $4,370 before the close and is currently trading around $4,376. Overall, with conflicting factors, gold has shown strong support after pullbacks, but short-term rebounds have also been limited, keeping the price in a range-bound pattern.
Where to Start
A Wolfinance star-rated analyst believes that gold's rebound from a one-week low last Friday was primarily driven by a weak U.S. dollar. The dollar opened lower and continued to decline, hitting a fresh one-week low, which provided support for gold prices. The strengthening market bets that the Federal Reserve will hold rates steady in September are the main reason for the dollar's decline. Specifically, the U.S. June CPI data declined, and the July CPI data released last week showed further cooling inflation. Simultaneously, the recently released July non-farm payrolls data was also weak. The combination of moderating inflation and weak employment has reduced the urgency for the Fed to raise rates in the short term, causing market expectations for a September rate hike to cool rapidly. This has provided important support for gold. However, gold's upward momentum has slowed recently due to the recurring situation in the Middle East, as concerns about a potential re-acceleration of inflation have limited the metal's short-term upside.
Why Just These Key Levels?
Looking ahead, the situation in the Middle East and expectations for Federal Reserve monetary policy remain the primary factors influencing gold's short-term volatility, and these deserve close attention. On the daily chart, gold's rally from last week has stalled, and its upward momentum has slowed, with the price temporarily in a range-bound consolidation. For gold's downside support, focus on the $4,370 level, which was the low point after last Friday's rebound failed. Gold has tested and stabilized around this level multiple times. Next, watch the $4,348 support level from last Friday's European session rebound, and the $4,310 low from last Friday, which is also near the low from the previous Monday. For upside resistance, pay attention to the $4,400 psychological level, where gold encountered resistance during last Friday's rebound. A breakout above this could target the week's high of $4,450 and the $4,500 psychological level. The 5-day moving average is gently curving lower, the MACD indicator is slowing its upward trajectory, the KDJ indicator is turning down from an overbought level, and the RSI indicator is curving slightly upward after a decline. Short-term technical indicators suggest that gold's upward momentum is weakening, and there is a need for a period of consolidation or correction.
Gold Trading Reference for the Day
Gold's upward momentum has slowed after meeting resistance at higher levels, but the price decline has been limited, keeping the trend in a range-bound consolidation. We recommend adopting a range-trading approach. Watch the support levels at $4,370, followed by $4,348 and $4,310. Watch the resistance levels at $4,400, followed by $4,450 and $4,500.
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