Gold has been looking fine since the start of the month, with a technical break above $4,200 buying a bit of breathing room for buyers. Since then, some hopeful optimism on US-Iran tensions – including that this week – is helping to afford more space on the run higher. And that even led to a further technical upshot last week from a break of the 200-day moving average (blue line).
This puts gold in a good spot even if some of that momentum has weakened this week, with traders now gearing up for a showdown with Fed chair Warsh tomorrow.
The big picture overview looks decent with buyers continuing to hold above the 200-day moving average (blue line) as well as the 38.2 Fib retracement level at $4,576. That gives some confidence to keep the upside momentum going especially as the dollar continues to remain in limbo for the most part.
The US Treasury capping yields will continue to be a key tailwind for gold, so the bond market will offer plenty of clues on if the price resurgence has more room to run for the precious metal.
The short-term chart is more mixed as buyers are now doing battle around the 100-hour moving average (red line). They have to keep above that to maintain a more bullish near-term bias. However, there is some fallback potential to around $4,580-00 for now with dip buyers stepping in overnight.
But on a break back below $4,575, there is much scope to run lower with the 200-hour moving average (blue line) seen quite a distance away closer to $4,525. That also rests near the 200-day moving average, which is seen at $4,524 currently. So, just be wary of these levels as well.
I reckon we won’t see too much action today as all eyes now turn to Fed chair Warsh’s keynote speech in Jackson Hole tomorrow. The event may not live up to the billing but it is still one that markets have to watch carefully just in case, especially now with blurred lines from the “Bessent put” being activated.
As things stand, traders are growing more convinced that there will not be a rate hike in September. The odds of that have now dropped to ~35%. Meanwhile, there is only ~27 bps of rate hikes priced in by year-end with only ~43 bps of rate hikes priced by June next year currently.
So any further dovish signals will continue to help with the repricing and bolster conditions for gold to flourish, should we see that from Warsh that is.
This article was written by Justin Low at investinglive.com.