On Tuesday, August 19th, our prior analysis suggested that gold had rebounded from its one-week low and remained in a high-level consolidation range. Cooling expectations for a Federal Reserve rate hike were weakening the US dollar, which provided support for gold prices. Consequently, our operational guidance pointed to support at the $4,380 level, followed by $4,350, with resistance at $4,450, and then $4,500.
Following that forecast, gold spiked to $4,436 during the Asian session on Tuesday. It then met resistance and retreated into a sideways range between $4,386 and $4,404 during the Asian and European trading hours. When the US session opened, the precious metal broke downward, finding a temporary footing at $4,351. After a rebound attempt was capped at $4,371, gold remained under pressure and slid to a new daily low of $4,329 near the close, with current trading around $4,342. In the grand scheme, the rebound remains constrained, and the price continues its high-level consolidation after facing rejection on the upside.
A senior analyst at Wolfinance suggests that the brief surge followed by a downward reversal on Tuesday was primarily driven by escalating Middle East tensions, which neutralized the short-term impact of cooling Fed rate hike expectations. Specifically, the simultaneous decline in US CPI and PPI data, coupled with a drop in non-farm payroll additions, has raised the probability of the Fed holding rates steady in September to 70%. This scenario provided key support for gold, enabling a sustained rebound from its one-week low and a fresh three-day peak. However, increasing geopolitical strife, highlighted by Trump's declaration that the Strait of Hormuz is "new US territory," has diminished hopes for a ceasefire agreement. Oil prices have climbed to a two-week high, fueling inflation expectations and reigniting fears of additional Fed tightening, which triggered the pullback in gold.
On the daily chart, gold's upward momentum has been stymied, with the price action maintaining a high-level range. Key downside support is seen at the $4,310 low from last Friday, where the price has stabilized before, and also at the psychological $4,300 level. A decisive break below this zone could amplify short-term downside risks. On the upside, initial resistance is at $4,352, a level where the price briefly stabilized during Tuesday's US session, followed by the $4,386 range from the Asian/European session. A breakout beyond that would target the $4,436 high from Tuesday, which aligns with the upper band of the 4-hour Bollinger Bands. Meanwhile, technical indicators show a bearish tilt: the 5-day moving average is curving downward, hinting at a potential bearish crossover. Both the MACD and RSI indicators show bearish momentum, and the KDJ has formed a death cross. This suggests that after multiple failed breakout attempts, the market is poised for a correction.
For today's trading outlook, the combination of Trump's assertive rhetoric on the Strait of Hormuz, escalating Middle East tensions, and a two-week high in oil prices has counterbalanced the recent cooling inflation and weak employment data, putting downward pressure on gold. Our recommendation is to adopt a range-bound trading strategy. Key support to monitor is the $4,310-$4,300 zone; a breakdown would heighten downside risks. On the other hand, resistance is expected at $4,352 and $4,386, with a further ceiling at $4,436.
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