Gold opened the week slightly weaker after snapping a three-week losing run with a late rally, as a pause in the dollar's advance and a pullback in oil prices took pressure off the metal. A short-term bullish technical setup is building, but gold must clear $4,400 to strengthen the case, while a break below $4,235 support could open the door to $4,100 and then $4,000.
Dollar Support Wavers as Oil Prices Retreat
Gold started the new week slightly weaker after ending a three-week losing run with a rally in the last two days of last week, as the US dollar rally paused and oil prices retreated. Risk appetite has also improved, with major indices bouncing and Bitcoin extending its rally to $85K.
With oil prices easing around 10% from their recent highs, a major source of dollar support against stronger currencies like the Australian dollar has faded. The Fed's hawkish rate hike last week, alongside dovish-leaning decisions from the Bank of Japan and Bank of England, has instead kept the yen and pound under pressure.
Middle East Risk Still Clouds the Outlook
Markets appear to be betting that disruption to Middle Eastern crude exports can be contained, with lingering hopes of de-escalation in the US-Iran conflict. Yet the situation remains far from settled: Trump again threatened Iran as he left the Camp David retreat a day earlier than expected. Gold is therefore trading in consolidation mode, as investors weigh the calmer backdrop against the risk of renewed hostilities.
If oil finds renewed support, the dollar and Treasury yields could rise and pressure zero-yielding gold. If calm persists and oil and yields keep slipping instead, gold could regain further ground.
Key Levels Define Gold's Next Move
The breakout from the falling wedge pattern seen last week looks similar to the price action that preceded the breakout in early August, a technically bullish short-term signal. But gold has been in consolidation mode since peaking in January, and its series of lower highs and lower lows has not yet broken to confirm a bullish trend.
Key resistance sits around $4,400, with further hurdles at $4,500 and then $4,565. A close above $4,400 is needed to strengthen the bullish case. Conversely, a break below support at $4,235 could pave the way toward $4,100 and then $4,000.
Source: Investing.com
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