Gold in Focus: Breakout Ahead or Another Range Move?

Gold in Focus: Breakout Ahead or Another Range Move?

Gold has climbed back to the upper boundary of a four-month trading range, currently testing a key resistance around the $3,450 level. While a clear breakout is not yet visible, market tension is building.

The recent upside was supported by Fed Chair Powell’s dovish remarks last Friday. Inflation expectations kept rising, while U.S. Treasury yields dropped to fresh lows. This pushed real yields lower – a classic driver for higher gold prices.

Today’s move higher comes without a significant catalyst, resembling those parabolic pushes often followed by a correction. Whether this pattern repeats remains to be seen.

All eyes are now on the upcoming U.S. labor market data, culminating in Friday’s NFP report. Strong figures could cut the odds of a September rate cut to roughly 50:50 and trigger a more hawkish repricing of the yield curve, weighing on gold. Weak data, however, would reinforce dovish bets, potentially pricing in a third rate cut this year and giving gold another boost.

In the bigger picture, gold remains in an uptrend, as real yields are likely to stay under pressure amid continued Fed easing. In the short term, though, hawkish repricing of rate expectations could keep triggering corrections.

Technical View:

Daily Chart: Gold is challenging the top of the four-month range. Sellers are likely to step in here with defined risk above resistance, targeting a pullback toward $3,245. Buyers, on the other hand, are looking for a breakout to fuel fresh bullish momentum toward new all-time highs.
1-Hour Chart: The recent bullish trend since Powell’s speech is clearly visible. Buyers have been leaning on the ascending trendline with stops just below, while sellers will look for a break lower to accelerate the move toward the $3,245 support.

Notably, momentum indicators are diverging from the latest rally – another signal that a pullback could be on the horizon.

Bottom Line: Next week will be decisive for gold. Hawkish labor market data could cap prices and trigger a correction, while a dovish surprise may pave the way for a breakout above $3,450 and potentially a new all-time high.

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