On August 21, during Thursday's session, we noted that the US Treasury's unexpected announcement to double the repurchase scale of long-term bonds led to a pullback in Treasury yields, a sharp decline in the dollar, and support for gold's rise to a fresh three-month high. The short-term technical picture also indicated that after gold's upward breakout, there was a temporary need for consolidation. However, with the bulls holding the upper hand, further upside was likely after the pullback. Therefore, we recommended monitoring support at $4,470 and $4,450, with resistance at $4,527, and a breakout above that level targeting $4,580.
Looking at subsequent price action, during Wednesday's European session, gold pulled back in a choppy manner, finding stability at $4,450. Following the US market open, gold once again tested $4,451 and stabilized before rebounding to face resistance at $4,484. After a pullback to $4,469, the metal continued its advance, reaching a daily high of $4,540 before consolidating in a high range above $4,500. On Friday's open, gold broke higher, extending its prior uptrend and printing a fresh three-month high of $4,601, with the metal currently trading around $4,584.
Overall, gold stabilized and rallied from our identified support at $4,450, achieving the target of $4,580, thereby continuing the established uptrend, with the rally broadly aligning with expectations.
According to a Wolfinance star-rated analyst, while escalating tensions in the Middle East pushed oil prices higher, reaching a fresh three-week peak, the resulting inflation expectations initially raised concerns over further rate hikes, which briefly stalled gold's upward momentum. However, recent CPI and PPI data showing cooling US inflation, along with weak July non-farm payrolls, dampened expectations for a September rate hike by the Federal Reserve. This provided crucial support for gold, limiting downside and leading to range-bound trading. By Wednesday, the Treasury's surprising announcement to double its long-term bond repurchase program was interpreted by the market as a signal of quasi-easing, pressuring the dollar to a three-week low and providing fresh momentum for gold's advance.
On the daily chart, gold broke out to the upside on Wednesday, extending its prior uptrend and marking a new three-month high, indicating robust short-term strength. To the downside, support can be identified at Thursday's rally high of $4,540, which was surpassed on the day. Further support lies at the $4,500 psychological level, which marked the pullback low after Thursday's surge, where prices stabilized for high-level consolidation. To the upside, resistance can be monitored at the $4,600 psychological level, near the day's high. A break above this could target the upper Bollinger Band at $4,630, followed by the $4,670 level, which marked the starting point of May's downward breakdown.
The Bollinger Bands are trending upward, opening further room for gains. The moving averages are in a bullish alignment, the MACD indicator shows a golden cross pointing up, and the KDJ and RSI indicators are also in bullish configurations. The short-term technical picture suggests gold has further upside potential.
Gold reference for the day: Cooling US inflation and weak employment data have dampened expectations for a September rate hike. Concurrently, the doubling of the long-term bond repurchase program effectively acts as a partial quantitative easing measure, pressuring the dollar. These factors collectively underpin gold's price increase. The recommended approach is to maintain a range-bound trading mindset. Support levels to monitor are $4,540 and $4,500, while resistance is at $4,600. A breakout above this level could target further gains at $4,630 and $4,670.
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